THE ROLE OF FEE BASED INCOME IN THE RELATIONSHIP BETWEEN DIGITAL BANKING SERVICES AND FINANCIAL PERFORMANCE

Abstract

ABSTRACT

This study examines the relationship between digital banking services and financial performance, with fee-based income serving as a mediating variable, using data from banking companies listed on the Indonesia Stock Exchange (IDX) during the 2020–2024 period. The rapid adoption of digital banking has transformed the banking industry’s business model, emphasizing efficiency, innovation, and non-interest income generation. Using a quantitative approach with panel data regression, this study analyzes 25 commercial banks to assess how digitalization indicators—such as mobile banking transactions, internet banking volume, and digital service users—affect return on assets (ROA) and return on equity (ROE). The results indicate that digital banking services have a positive and significant impact on financial performance, both directly and indirectly through the increase in fee-based income. The mediation analysis confirms that fee-based income partially mediates the relationship between digital banking and profitability. These findings suggest that digital transformation not only enhances operational efficiency but also diversifies revenue streams, strengthening the overall financial performance of banks in the digital era.