Efficiency and productivity in the Taiwanese banking industry: a comparative analysis of the pre- and post-bank 3.0 eras

Abstract

This study examines the efficiency and productivity of Taiwanese banks during the pre- and post-the third-generation banking transformation (Bank 3.0) periods. It focuses on assessing performance disparities before and after digital transformation initiatives. To achieve this, we utilize Data Envelopment Analysis and the Malmquist Productivity Index to evaluate banks’ operational efficiency and dynamic productivity changes. The analysis includes a comparative perspective between financial holding and non-holding banks. By integrating intellectual capital indicators and a comprehensive panel dataset covering the period from 2007 to 2022, the study provides a multifaceted evaluation of the banking industry’s performance. The findings reveal that while digital finance initiatives have contributed to overall productivity gains, their effects are uneven. Larger financial holding banks benefit more significantly from technological adoption due to resource advantages and scale economies, whereas smaller banks face greater challenges in adapting to digital transitions. These results underscore structural asymmetries within the sector and highlight the importance of strategic digital planning and adaptive capacity. Importantly, the findings hold practical implications for banking strategy, regulatory design, and financial technology investment in emerging markets, emphasizing the need for supportive policies enabling smaller institutions to transition effectively, ensuring inclusive digital financial development and long-term competitiveness.