Performance evaluation and risk analysis of online banking service

Abstract

Purpose

Online banking has attracted a great deal of attention from various bank stakeholders such as bankers, financial service participants, and regulators. The purpose of this paper is to analyze the online banking service performance of giant US and UK banks. Risk analysis is also conducted.

Design/methodology/approach

This paper connects the principal component analysis (PCA) method with the data envelopment analysis (DEA) method to estimate the online banking performance. Data are collected from 2007 annual reports of giant banks in the USA and the UK including both financial and non‐financial variables.

Findings

Most giant banks are performing well based on DEA analysis. Employees turn out to be a key variable that contribute most to banks' revenue. Different DEA models can be classified into cost‐ and online‐oriented models, which is consistent with existing work based on data from other nations.

Originality/value

This paper presents a unique demonstration of using PCA and DEA for evaluation of giant banks with online banking service.

Citation

Wu, D. and Dash Wu, D. (2010), "Performance evaluation and risk analysis of online banking service", Kybernetes, Vol. 39 No. 5, pp. 723-734. https://doi.org/10.1108/03684921011043215