Influence of digital commerce and mobile point-of-sale payments on bank risk and performance in Bahrain: A dynamic panel analysis

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Abstract

This research assesses the influence of digital payments, specifically digital commerce and mobile point-of-sale (POS) payments, on the financial performance and risk management of retail banks in Bahrain. The study covers the period from 2018 to 2023, utilizing secondary data from seven retail banks, which include both commercial and Islamic banks. The bank’s performance is measured by return on assets (ROA) and return on equity (ROE). Additionally, the debt-to-capital ratio (DTC) and debt-to-equity ratio (DTE) are employed to assess risk. To analyze the impact of digital payment adoption on bank performance and risk, the Arellano-Bond generalized method of moments (GMM) dynamic panel data model was applied using Stata software. It is a similar approach used in financial technology studies examining banking performance (Irmaningtyas & Rosadi, 2014). The findings reveal that the adoption of digital commerce and mobile POS payments has an insignificant impact on traditional performance measures, such as ROA and ROE, during the study period. However, these digital payment technologies show a significant association with DTC, while these results highlight the insignificant effects of digital commerce and mobile POS payments on the DTE ratio. These findings contribute to the ongoing discussion on the role of financial technology in shaping banking performance and risk, addressing a key research gap in the literature such as Phan et al. (2020).

Keywords: Banks, Digital Payment, Performance, Risk, E-Commerce, Bahrain

Authors’ individual contribution: Conceptualization — F.R. and W.S.; Methodology — M.D.; Software — M.D.; Formal Analysis — M.D. and F.R.; Investigation — M.D. and R.S.; Data Curation — F.R.; Writing — Original Draft — F.R., W.S., and A.A.; Writing — Review & Editing — W.S., A.A., and R.S.; Supervision — F.R. and A.A.; Project Administration — F.R.; Funding Acquisition — M.D., F.R., W.S., A.A., and R.S.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: C3, E42, G21, G32, O33

Received: 27.10.2024
Revised: 27.02.2025; 15.05.2025
Accepted: 05.06.2025
Published online: 10.06.2025

How to cite this paper: Doblas, M., Rajab, F., Salman, W., Alabbas, A., & Salindo, R. (2025). Influence of digital commerce and mobile point-of-sale payments on bank risk and performance in Bahrain: A dynamic panel analysis. Risk Governance & Control: Financial Markets & Institutions, 15(2), 134–147. https://doi.org/10.22495/rgcv15i2p12