Dinh et al., J Internet Bank Commer 2015, 20:2 http://dx.doi.org/10.4172/1204-5357.1000103 Research Article Open Access Journal of Internet Banking and Commerce Volume 20 • Issue 2 • 1000103 J Internet Bank Commer ISSN: 1204-5357 JIBC, an open access journal Measuring the Impacts of Internet Banking to Bank Performance: Evidence from Vietnam Van Dinh*, Uyen Le and Phuong Le Faculty of Finance and Banking, VNU University of Economics and Business, Hanoi, Vietnam *Corresponding author: Van Dinh, Falcuty of Finance and Banking, VNU- University of Economics and Business, Hanoi, Vietnam, Tel: +84904641686; Email: vandtt@vnu.edu.vn Received June 10, 2015; Accepted July 10, 2015; Published July 12, 2015 Citation: Dinh V, Le U, Le P (2015) Measuring the Impacts of Internet Banking to Bank Performance: Evidence from Vietnam. J Internet Bank Commer 20: 103. doi:10.4172/2165-7866.1000103 Copyright: © 2015 Dinh V, et al. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. Keywords: Internet banking; Commercial bank; Performance ratios; Service channel Introduction he competition is ierce in the economy and particularly in banking sector. Banks will fully exploit all factors available to help banks gain market share and retain customers, which become increasingly hard in the digital age. Consumer is shiting from tradition channels to digital ones and the multichannel model now is the popular trend in the banking industry. As the earliest-adopted digital channel, Internet banking is currently the feature can be expected to ind at a commercial bank. Since it was implemented, customers were able to do their banking with the speed, convenience and control more than ever. As a result, banks enhance customer satisfaction and increase their user loyalty–the ultimate goals of all banks in current situation. On the other side, Internet banking is a service with great potential. It would become a decent source of proits for banks; reduce bank’s operating expenses so ultimately enhance bank performance. To date, Internet banking is not just an element to compete for market share but becomes an essential service to provide, if not banks would face the chance of losing their market share or bad efects to their brand. here are good reasons to expect that Internet banking will spread expeditiously and have a great impact on banks performance. However, it seems not to be the case in Vietnam. hough available in since 2004, the scale of Internet banking is relatively small. Till 2014, total users of this service have only reached 6 million, equivalent 17% of total Internet users which is even lower than the average of Asia-Paciic. herefore, commercial banks are facing the risk of not meeting customer’s expectations especially when e-commerce is gradually developing which caused the rising need of online payment mechanisms. According to estimates, total value of online shopping increases more than 57 million dollars annually. his is an opportunity for both e-commerce enterprises and inancial service provider. In fact, according to Vietnam ICT Index 2014 report, 13/25 surveyed commercial banks reported a ratio of digital transaction (through Internet banking, mobile banking) value less than 2% while these channels have been ofered before 2004. he data suggests that banks have not valued properly or had an efective strategy to exploit the huge potential of these channels, especially the Internet banking platform. In order to shed a light on that problem, the question of how internet banking afects banks’ performance in Vietnam needs to be addressed. However, to date few empirical studies are available regarding the impact of Internet banking on the inancial performance of commercial banks in Vietnam. he purpose of this paper is to identify and estimate the impact of Internet banking from the commercial banks’ perspective. To be speciic, this study attempted to examine the impact on proit, operating cost, and proitability of the adoption of the Internet as a distribution channel. A sample of 20 banks, accounted for about a half of the total number of commercial banks, which is approximately 70% of total asset of Vietnam banking sector over the period 2009–2014 is used. From the regression results, the authors hope to provide practical recommendations for banks to improve and develop that delivery channel in an optimal way. he results suggest that Internet banking adoption afects the income and consequently the proitability of commercial banks in Vietnam. his impact is gradual and takes a time lag of three years to be statistically signiicant. his article is divided in four parts. First, the introduction presents an overview of the article. he second part describes theoretical basis and methods of analysis. Part three provides results from regression analysis and discussion. he fourth part ofers some conclusions and recommendations for commercial banks in Vietnam. Heoretical Basis and Methods Heoretical basis and analysis framework Internet banking is a service of electronic banking (E-banking). According to Comptroller’s Handbook [1], it enables bank customers to access accounts and general information on bank products and services through the Internet. Besides existing channels such as ATM, PC banking, Home banking, the adoption of Internet banking adds another delivery channel and forms the multichannel model seen widely in banking industry nowadays. Internet banking holds huge potential as a convenient and eicient delivery which has not been provided before by banks. At its ultimate end, Internet banking may become a new business model totally diferent from the traditional one (Internet-only model – bank with no branch, all banking activities is performed online). Abstract Internet banking is an innovative service in the banking industry. However, researching about the impact of internet banking to bank’s performance is rarely seen. In Vietnam, no research has been found recently by researchers. The main objective of this study is to evaluate the impact of internet banking to performance (proitability ratios, noninterest operating expenses and incomes) of banks in Vietnam in the period from 2009-2014. The study uses random effect model (REM) and ixed effect model (FEM) to estimate the relationships between Internet indicators and bank’s performance. The results from the regression model showed that internet banking had an impact on bank proitability through an increase of income from service activities. However, the impact level was low and had a lag time of over 3 years, which is longer than indings from previous studies.