Productivity Analysis of Two Banks As A Result of Adoption of New Technology and Business Processes

Complementary investments required in the adoption of new technology and business processes often are intangibles and poorly measured in the financial statements and national accounts. Unmeasured outputs and unmeasured inputscan lead to underestimation of productivity growth in early periods of the adoption of new technology and business processes and overestimation of productivity growth in later periods when the benefits of the intangible investments are harvested. As technological innovations radically change the competitive environment and challenge traditional business processes acrossthe entire value chain of banking sector, this case study evaluates whether similar patterns can be observed in two banks in Indonesia. The study examinesthe relationship between costs related to investments in new technology,business processes and improvement in human resources with the productivity measures of the banks based on financial information published by the banks for the period of 2011 to 2020. The study finds that, based on various productivity measures observed, the productivity of the banks either declined, relatively remained at the same level or slightly increased linearly. As such,significant improvement in productivity measures in the later periods as compared to the early periods were not observed in both banks in the periodof 2011 to 2020, indicating the banks were in the early stages in the process ofadopting new technology and business processes. Expanding the study to theperiods beyond 2020 may provide further observation on whether the investments in new technology and business processes will result to significant increase in productivity measures in the later periods of an extended period.