Cashless Payments and Banking Performances: A Study of Local Commercial Banks in Malaysia

The banking industry plays a facilitatory role in moving toward a cashless society. This study investigates the impacts of cashless payments (ATM, internet banking, mobile banking, credit card, debit card, charge card and e-money) on banking performance for eight local commercial banks in Malaysia over the period of 2005 to 2018. The findings show that cashless payments are positively related to the return on assets (ROA) and return on equity (ROE) of banks, except e-money. Furthermore, the study demonstrates cashless payments have improved the cost-to-income ratio of banks, except ATMs. Meanwhile, this study disaggregates the sample into subperiod analysis to further examine the transition effect of cashless payments on banks’ performance. The results show that banks’ profitability performance is mainly driven by the usage of cashless payments in the first wave of progressive development, while cashless payments do not show progressive impact on banks’ efficiency performance. This suggests that cashless payments do not add value to banks’ performances in the long run.