Did Financial Consumers Benefit from the Digital Transformation? An Empirical Investigation

Soojin Park, Prida Erni Kesuma and Man Cho
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Soojin Park: KEPCO International Nuclear Graduate School (KINGS), 658-91 Haemaji-ro, Seosaeng-Myeon, Ulju-gun, Ulsan 45014, Korea
Prida Erni Kesuma: KEPCO International Nuclear Graduate School (KINGS), 658-91 Haemaji-ro, Seosaeng-Myeon, Ulju-gun, Ulsan 45014, Korea
Man Cho: KDI School of Public Policy and Management, 263 Namsejong-ro, Sejong-si 30149, Korea

IJFS, 2021, vol. 9, issue 4, 1-18

Abstract: This study aimed to test, through empirical investigation, how the rapid advancement of digital transformation (DT) has impacted the price of financial services. To this end, we compiled a set of macro-level indicators on the aggregate outcomes of the financial services sector in Korea over the last three decades and conducted an analysis to gauge the effects of DT on the country using those indicators. Using the ARDL-ECM (autoregressive distributed lag error-correction model), we show that, over time, the unit cost of financial intermediation in Korea has tended to move in tandem with the growth in economic output, although the profit portion of the unit cost has not exhibited a long-term relationship with the GDP trend. The long-term effect of the DT trend is negative (i.e., cost-saving) for labor input, capital expenditure, and the total unit cost of financial intermediation, which are all shown to be statistically significant. Consequently, we conclude that DT contributed to enhancing consumer benefit, mainly by achieving the operational efficiency of labor and capital, from 1990 to 2019 in Korea. From a policy perspective, our finding implies that DT-driven innovation in the sector can benefit financial customers if excessive levels of profit are restrained through market competition.

Keywords: digital transformation; financial consumer protection; financial operational efficiency; error-correction model (ECM); financial consumer policies (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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