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VOLUME
Vol.05 Issue 07 2025
PAGE NO.
10-20
10.37547/ijmef/Volume05Issue07-03
The Role of Electronic Banking Services in Enhancing
Bank Profitability: An Analytical Study of a Sample of
Private Iraqi Commercial Banks
Ahmed Sabah Ali Mahmood
Department of Financial and Banking Sciences, College of Administration and Economics, Al-Mustansiriya University, Baghdad, Iraq
Asst. Prof. Dr. Sadiq Taama Khalaf Al-Bahadli
Department of Financial and Banking Sciences, College of Administration and Economics, Al-Mustansiriya University, Baghdad, Iraq
Received:
22 May 2025;
Accepted:
18 June 2025;
Published:
20 July 2025
Abstract:
The study aims to demonstrate the extent to which the level of electronic banking services reflects the
banking profitability indicators of a sample of private banks (Baghdad, Al-Ahli, and the Middle East) listed on the
Iraq Stock Exchange. The study identified a problem: To what extent do electronic banking services affect
profitability indicators in the selected sample banks? Are the bank's electronic banking services compatible with
the banking industry's economic reality and technological developments? The study reached several conclusions,
including that electronic banking services, especially ATMs, points of sale, and electronic card services, have
positively impacted profitability indicators in some banks, including the National Bank of Iraq and the National
Bank of Baghdad. Their importance has diminished or had no positive impact on the National Bank of the Middle
East. Expanding the National Bank's digital infrastructure has reduced costs and increased operational efficiency,
improving profitability.
Regarding compatibility with economic and technological realities, these services are fully aligned with global
trends in the banking sector. This transformation has become inevitable in the current era, as financial institutions
strive to provide convenient, fast, and secure services to customers, enhancing their competitiveness in the
market. Furthermore, leveraging digital infrastructure helps banks keep pace with global economic
transformations that are driving a reduction in reliance on cash and stimulating digital transactions.
Keywords:
Electronic banking services, commercial profitability, Bank of Baghdad, National Bank, Middle East
Bank.
Introduction:
The world is experiencing a wave of
changes and scientific discoveries in the field of
information technology. The invention of computers
and the Internet accelerated the transformation of
traditional administrative methods and structures,
creating a society based on digital technology. This has
been reflected in all political, economic, and social
spheres, including the emergence of electronic banking
services in the banking sector.
With this digital development, most Iraqi banks and the
banks of Baghdad, Al-Ahli, and the Middle East
compete to gain customer loyalty through the
electronic banking services they provide quickly, with
high quality, and at the lowest cost. These services offer
great convenience to customers, whether through the
Internet or other electronic delivery methods, which
provides ease of transaction and low price. Electronic
financing has become one of the most important
technological variables in the financial industry for
banks. The forms of electronic banking services are
diverse for these banks, which provide a range of
services in a bid to gain customer loyalty, including the
multi-functionality of ATMs, the spread of point-of-sale
(POS) devices and mobile points of sale (POCs), and the
issuance of electronic cards. This has facilitated
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International Journal of Management and Economics Fundamental (ISSN: 2771-2257)
customers' transactions quickly and easily.
First: Study Methodology
1. Research Importance:
1. In the banking field: This research helps private
commercial banks understand how to leverage modern
technology to provide their services to enhance their
competitiveness and profitability.
2. For customers: Understanding the benefits of the
electronic services provided by these banks contributes
to enhancing the customer experience.
3. For those responsible for banking policies: This
research provides insights into improving the banking
business environment by implementing modern
electronic services.
2. Research Problem:
The research problem lies in posing the following two
questions:
1. To what extent do electronic banking services affect
profitability indicators in the selected sample banks?
2. Are the electronic banking services provided by the
bank compatible with the reality of economic life and
the technological development of the banking
industry?
3. Research Hypothesis
Electronic banking services play a role in enhancing the
profitability indicators of the banks in the study sample.
4. Research Objective:
The study aims to:
1. Identify the level of electronic banking services
represented by the level of electronic banking services
provided.
2. Identify the level of profitability achieved by
commercial banks, represented by (return on assets,
return on equity, return on available funds, and profit
margin).
3. Explain the positive effects of enhancing the
efficiency of electronic banking services on profitability.
4. Analyze the profitability indicators of the commercial
banks in the sample.
5. Research Methodology:
The researcher relied on descriptive (theoretical) and
analytical (applied) approaches to achieve the research
objectives and prove its hypothesis. This approach was
based on the annual reports of the sample banks for
the period 2015-2023. The researcher also relied on
personal interviews conducted with stakeholders in
these banks and published and unpublished data from
the Central Bank of Iraq's bulletins and the sample
banks to integrate the relationship between electronic
banking services and profitability indicators of the
commercial banks within the sample. Second: The
Concept of Electronic Banking
The concept of electronic banking is one of the newest
economic concepts that has received significant
attention from researchers over the past few years,
especially as we live today in an era brimming with
information technology and electronic services, which
have yielded a vast array of applications and programs
spanning all economic sectors. Under this modern
concept, bank customers can now conduct exchange
transactions (buying and selling) over the Internet,
using the electronic payment methods available from
banks. Banks' electronic services work to achieve the
highest quality of services produced at a lower cost and
in a shorter time (Abdali, Hala, 2017, p. 384). The Bank
for International Settlements defines electronic
banking as "the state in which banks provide banking
services remotely or via electronic channels, whether
to residents or non-residents inside or outside the
country" (Al-Damour, Hamed Hani, 2005, p. 21). It has
also been defined as "conducting banking operations
electronically through the use of new information and
communication technology, whether related to
traditional or modern banking. This eliminates the need
for customers to travel to the bank." So that he can
obtain the service from his bank at any time and any
place (Al-Haddad, Waseem Muhammad and others, p.
55).
Third: Dimensions of electronic banking services.
1- Providing integrated, high-quality banking services:
These services include both modern and traditional
electronic banking services. However, the former is
distinguished by its modern performance and keeping
pace with the developments of modern technology,
through (Al-Sarn, Raad Hassan, 2007, p. 315):
A- Issuing electronic newsletters advertising the bank's
banking services.
B- Providing customers with a method for knowing and
verifying their balances with the bank.
C- Providing customers with a method for paying bills
drawn on them electronically.
D- Highlighting how to manage customers' investment
portfolios (stocks and bonds).
E - Method of transferring funds between different
customer accounts.
2 - Cost of electronic banking services: Banks realize
that customer satisfaction is essential to achieving
long-term profitability. However, at the same time,
they do not aim to improve customer and employee
satisfaction at the expense of the costs they incur.
Rather, they aim to manage these relationships, as well
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as the drivers of profitability, to improve the quality of
performance and, consequently, profitability (Hassan,
Salah El-Din, 1998, p. 164).
3 - Speed of electronic banking services: The banking
arena is witnessing a widespread proliferation of
electronic banking services. The speed, quantity, and
quality of electronic banking services have become
essential factors in the competition between
commercial banks to attract customers. However, the
use of these services remains below the desired level.
Many factors also play a role in motivating individuals
to adopt technology to implement these services
electronically. One of these factors is the individual's
ability to understand the importance and benefits of
these services, which must be available internally (Al-
Zaghbi, Saddam; Al-Afeef, Muhammad Ali, 2023, pp.
254-255).
4- Ease of Communication: The use of electronic
communication methods (telephone, fax, and the
internet) allows customers to easily contact the bank,
learn
about
the
banking
services
provided
electronically, and submit their inquiries to the bank's
automated
response
staff.
This
facilitates
communication between the two parties (customer
and bank), strengthening the relationship between
them. This feature allows customers to send
information to the bank about their interest in a
particular electronic banking service. This allows the
bank to benefit from feedback and study market
conditions (Nariman, Halili; Muhammad, Bin Bouzian,
2022, p. 104).
Fourth: Types of Electronic Banking Services
1- Automated Teller Machines (ATM): These are
automated devices that operate 24 hours a day to serve
customers without human intervention, within pre-
prepared programs. This is done through an ATM card,
which is a plastic card with specific specifications issued
by banks and is available to the customer upon
notification. This card carries a secret number
determined by its owner to ensure confidentiality and
security when withdrawing from an ATM (Abdul Allah,
Khaled
Amin;
Al-Tarad,
Ibrahim,
2006,
p.
221).000000000
2- Electronic cards: These are magnetic cards made of
a tamper-evident material, issued by a bank or other
financial institution. The cardholder can use them to
purchase most of their needs or pay for services
without having to carry large sums of money, which
could be exposed to the risk of theft, loss, or damage
(Ahmed, Jameel; Kahina, Rasham, 2009, p. 109). They
are, in turn, divided into four types (Abdul Naeem, Elias
Shahid, 2017, p. 2):
A - Payment cards: These are issued by banks or
international finance companies based on the
customer's actual balances in the form of current
accounts that correspond to the corresponding
withdrawals.
B - Credit cards: These are cards issued by banks within
specific amounts, enabling the holder to purchase their
needs immediately and pay for them later. Interest is
charged on the account statement for the amount
exceeded by the customer at the end of each month.
C - Monthly debit cards: These cards differ from credit
cards in that they are fully repaid to the bank by the
customer within the month in which the withdrawal
was made (i.e., the credit on these cards does not
exceed the duration of the month).
D. ATM card: This card allows the customer to
withdraw cash from their account up to a pre-agreed
maximum. It also enables the customer to withdraw
the funds they need during bank closures. The
customer inserts the card into the bank's ATM and
enters the four-digit PIN by pressing the keypad on the
machine. Bank cards are issued by a group of
international
organizations
and
financial
and
commercial
institutions,
including
(Al-Maghribi,
Muhammad Al-Fateh Mahmoud Bashir, 2016, p. 169):
• Visa International: This is one of the largest
international credit card issuing companies, dating
back to 1958 when the Bank of America issued the Blue,
White, and Gold cards. 3- Smart Cards: In keeping with
the developments of the technological era, smart cards
have emerged. These are plastic cards containing an
electronic cell that stores all the holder's data, such as
name, address, issuing bank, disbursement method,
disbursed amount and date, and the customer's
banking history (Brahimi, Abdul Razzaq; Habbal, Abdul
Malik, p. 8).
4. Correspondent Banks: These are the banks that the
bank that opens the documentary credit relies on to
inform it of the letter of credit, revealing the seller's
rights and obligations to be fulfilled, for the purpose of
delivering the value of the credit. The correspondent
bank is not obligated to pay, as it is considered an agent
of the bank that opens the credit in the notification
process. Alternatively, it is a network of foreign banks
and financial institutions whose tasks are limited to
providing services, money transfers, documentary
credits, and financing foreign trade for the bank's local
customers or international activities. Because they deal
with the local bank, they are responsible for providing
services on its behalf and are located abroad (Central
Bank of Iraq, 2021, no page).
3- Electronic Points of Sale (POS): Electronic POS is an
electronic cash system in stores that accept electronic
payment for purchases. These devices are connected to
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communication stations with banks, where the value of
purchases is deducted from the cardholder's account
and added to the merchant's account by swiping the
card over these devices. The electronic POS system
works in the same way as an ATM, except that it is
located within the institution or store (Qasim, Adeeb,
2011, p. 7). 4- Internet Banking: Through this service,
customers of banking institutions can conduct financial
transactions by using the electronic page owned by the
banking institution via the Internet. This secure and
convenient service allows customers who own debit
cards to access their bank accounts anywhere and
anytime, whether from home or work. The customer
opens the bank's website and enters the designated
banking service website to enter the card number and
PIN. Some banks require additional information for the
purpose of confidentiality and protection against theft
and other purposes (Bint Jeddou, Umnia; Diqash,
Samia, 2020, p. 92).
5- Mobile banking: The phone provides electronic
banking services directly to the customer through an
automated communication system that provides
information, conducts transfers, and receives loan
applications. This service is considered advanced and
attractive to people who are constantly on the move. It
also connects to mobile phone companies or through
contracted public or private networks (Masoudi, Abdul
Hadi, 2016, pp. 24-25).
Fifth: Analysis of electronic banking indicators for the
selected sample
1.
Electronic banking services of the Baghdad
Investment Bank for the period (2015-2023)
2.
The current electronic services provided by the
bank reflect the extent of its development and its
position among banks through increased competition
among them in delivering services that keep pace with
global developments. This is achieved through
developing its electronic payment channels system by
updating the bank's website, adding ATM locations,
and using payroll features for companies, which
provides it with flexibility, liquidity, and speed of
completion (Bank of Baghdad, 2019, p. 15), and gaining
a greater number of customers, as well as expressing
the movement of economic activity in expanding
investments. The bank's vision for 2023 aimed to
implement part of its plan according to its main axes,
which focus on developing the bank's operations and
technology axis, in addition to structuring and
developing individual and corporate services through
the implementation of several projects aimed at raising
the level of the bank's services, especially electronic
ones, to keep pace with developments in the banking
industry. This vision resulted in several achievements
through the implementation of a series of projects that
had a significant impact in bringing about a qualitative
shift in the services provided and developing service
management programs by adding the operational risk
management program (Nucleusl). On the customer and
market side, redeployment was carried out in some
branches in the governorates, in addition to the bank's
re-evaluation with major international companies (CI),
the results of which are expected to be completed
before the end of the first half of 2023, and the
commencement of the information governance project
(COBIT) (Bank of Baghdad, 2023, p. 83). The following
table shows the electronic banking services of the
Baghdad Investment Bank for the period (2015-2023):
Table (1) Electronic Banking Services of the Bank Baghdad Al-Ahly for the period (2015-2023)
years
Number of
ATMs
POS
POC
Number of
electronic cards
2015
10
15
50
72,650
2016
10
35
50
85,010
2017
30
35
75
97,370
2018
50
35
75
109,730
2019
60
50
75
122,090
2020
70
50
100
134,450
2021
81
58
108
148,810
2022
90
67
117
152,346
2023
95
72
126
157,412
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Source: Central Bank of Iraq, Payments Department, Operations Division, unpublished data.
Table (1) shows the significant increase in the number
of automated teller machines (ATMs) from (10) in 2015
to (95) in 2023, as well as in point-of-sale (POS)
services, which increased from (15) to (72) POS, and in
mobile electronic payment (POC) services, which grew
from (50) to (126), reflecting a significant development
in the digital transformation strategy of the National
Bank of Baghdad. This substantial growth is due to
several scientific and technical factors, most notably
the development of financial technology and the
increased reliance on digital solutions to improve the
customer experience and facilitate access to banking
services. The growth in point-of-sale (POS) services also
reflects increased digital payment transactions due to
the shift towards a digital economy and the
encouragement of cashless transactions, which have
become safer and easier to use. In addition, the
enhancement of the electronic payment system (POC)
can play a role in facilitating prepaid money transfers
and increasing the use of electronic payment cards,
which have grown in this bank from 72,650 cards in
2015 to 157,412 cards in 2023. This positive increase in
electronic services reflects the bank's keenness to keep
pace with the latest technological developments in
electronic applications and alternative channels for
digital transformation by enhancing its electronic
services and electronic distribution channels and
expanding the spread of ATMs across all governorates
to achieve operational efficiency, maximize profit
margins, and maintain cash liquidity on an ongoing
basis (Bank of Baghdad, 2023, p. 83). 2. Electronic
Banking Services of the National Bank of Iraq for the
Period (2015-2023)
Table (2) Electronic Banking Services of the National Bank of Iraq for the Period (2015-2023)
Years
Number of Atms
Number of Pos
Points
Number of
Mobile Pocs
Number of
Electronic Cards
2015
10
0
2000
11,400
2016
30
50
2500
12,530
2017
65
50
2500
14,930
2018
80
85
5000
18,720
2019
100
100
6000
23,010
2020
150
100
6000
30,080
2021
169
112
6800
39,270
2022
178
123
7400
46,578
2023
187
136
8500
54,210
Source: Central Bank of Iraq, Payments Department, Operations Division, unpublished data.
By analyzing the data in Table (2) related to the
electronic banking services of the National Bank of Iraq
between 2015 and 2023, significant growth can be
observed in various aspects of the bank's electronic
services. The number of ATMs increased significantly
from (10) machines in 2015 to (187) machines in 2023,
reflecting an improvement in the ability to provide cash
withdrawal and deposit services to customers as a form
of the bank's electronic services. This growth is due to
investment in expanding the ATM network, thus
facilitating access to funds and reducing pressure on
traditional branches.
Points of Sale (POS) also witnessed similar growth,
rising from (10) to (136) during the same period. This
facilitates electronic payment transactions for a greater
number of merchants and consumers and reflects the
expansion in the use of bank card payments as an
alternative to cash payments.
Mobile points of sale (POS) increased significantly from
2,000 to 8,500, indicating the bank's drive to increase
the use of mobile devices that facilitate payment
transactions in areas without fixed infrastructure. This
contributes to the further expansion of e-commerce
and commercial services.
Finally, electronic cards increased from 11,400 in 2015
to 54,210 in 2023, indicating the bank's success in
spreading the electronic payment culture and
expanding its customer base who rely on electronic
means to conduct banking transactions. This reflects a
significant development in the bank's strategy to adopt
digital services and facilitate access. 2. Electronic
Banking Services of the Middle East Iraqi Investment
Bank (2015-2023)
The bank was established in 1993 and ranked first
among Iraqi private banks according to the global
CAMEL system for four consecutive years (2007, 2008,
2009, 2010). The bank aims to improve the
performance of international banks by adopting
advanced methods, including technology, which has
become a fundamental pillar of modern banking. The
bank will continue to offer the latest banking methods
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in the banking industry. It will remain an advanced and
distinguished bank in serving its customers and
protecting the funds and rights of shareholders (Majid,
Zainab Abdul Khaliq, 2020, p. 54).
The bank offers various services, including the
electronic banking system (e-banking), which allows
customers to conduct banking transactions online
easily and securely. In addition, the bank provides
automated teller machines (ATMs) spread across
various regions to meet customer needs. It also
includes point-of-sale (POS) services facilitating
electronic payment transactions in stores and
commercial facilities. It also offers an ATM service for
quick cash withdrawals, balance inquiries, and the
issuance of MasterCard cards to all its customers, in
addition to many other electronic services (Majid,
Zainab Abdel Khaleq, 2020, p. 54).
Table (3) Electronic Banking Services of the Middle East National Investment Bank (2015-2023)
Years
Number of ATMs
POS
POC
Number of
electronic cards
2015
20
25
50
7,625
2016
20
30
75
8,113
2017
20
30
100
8,727
2018
25
40
100
9,847
2019
30
50
100
12,982
2020
30
50
150
13,419
2021
36
52
168
14,078
2022
42
56
174
14,536
2023
50
61
182
23,174
Source: Central Bank of Iraq, Payments Department, Operations Division, unpublished data.
The data in Table (3) reflect a gradual development in
the Middle East Bank's capabilities to provide digital
services, focusing on improving the availability of
ATMs, POS, and mobile POS and increasing the number
of electronic bank cards. The number of ATMs began at
only (20) in 2015 and gradually increased to (50) in
2023. Despite the increase, the number remains
relatively low compared to other banks or the
aspirations of the local market, indicating that the bank
needs to accelerate investment in ATM infrastructure
to meet the growing demand for withdrawal and
deposit services.
As for point-of-sale (POS) devices, they increased from
(25) in 2015 to (61) in 2023, reflecting a gradual
improvement in the spread of these devices. However,
this number remains limited compared to other
markets, and there is a growing need for electronic
payment in commercial sectors. This indicates the need
to enhance the point-of-sale (POS) infrastructure to
encourage more merchants to rely on card payments.
On the other hand, mobile POS devices increased
significantly from 50 devices in 2015 to 182 devices in
2023. This is a positive development, as these devices
give the bank greater capacity to provide electronic
payment services in areas without fixed infrastructure.
This increase in mobile POS devices is a strong point in
the bank's strategy to expand the use of electronic
payment across various locations.
Electronic bank cards witnessed significant growth
from 7,625 cards in 2015 to 23,173 cards in 2023,
demonstrating the bank's success in attracting new
customers and encouraging them to use electronic
services in their daily financial transactions. However,
the number of cards remains below expectations
compared to population growth rates and the demands
of the digital financial market, highlighting the need for
further awareness campaigns and increased offerings
to attract the largest number of customers.
Sixth: Analysis of profitability indicators in the selected
sample banks
1. Analysis of profitability indicators at the National
Bank of Baghdad
Table (4) Profitability indicators for the National Bank
of Baghdad for the period (2015-2023)
Years
Return on Assets%
Return on
Equity%
Return on
available
funds%
Profit
margin%
2015
0.42
2.4
0.55
8.11
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2016
1.69
7.16
1.82
27.49
2017
0.56
2.21
0.62
11.3
2018
0.37
1.56
0.39
11.35
2019
0.64
0.27
0.28
18.29
2020
0.14
0.07
0.65
3.34
2021
1.94
0.96
7.05
3.61
2022
2.03
15.20
3.20
49.9
2023
5.66
32.88
9.39
66.64
The researcher prepared data from Appendix Table
No. (1).
It is noted from Table (4) that profitability rates were
positive throughout the study period for this bank and
reached their highest rates in the years (2022-2023).
The last year recorded the highest return on assets,
reaching approximately (5.66%), and the return on
equity rose to (32.88%), while the profit margin
recorded a significant increase this year (66.64%).
These indicators reflect the rise in the financial
performance of this bank during this period, which was
characterized by stability. The return on available funds
was the highest rate in 2023 due to the expansionary
investment activity witnessed by the bank after the end
of the coronavirus pandemic, in addition to the rise in
oil prices in recent years.
The positive ratios of the above indicators reflect the
bank's ability to improve the quality of its assets and
maintain its competitive position within the banking
sector in Iraq, despite the challenges created by the
coronavirus pandemic, which cast a shadow over the
markets which the Bank of Baghdad operates.
However, the adoption of bank's management adopts
a precautionary policy that balances profitability and
risks, improves asset quality, and transforms challenges
into opportunities for success. This has positively
impacted the bank's performance growth regarding
profitability, maximizing revenues, and reducing
expenses, which has positively impacted profitability
indicators (Bank of Baghdad, 2023, p. 84). To analyze
the effect of banking services (referred to in the
previous section) on these indicators at the National
Bank of Baghdad, it is noted that the significant
improvement in the number and quality of electronic
banking services has impacted operational efficiency
and increased production. Automated teller machines
(ATMs) and mobile points of sale (POS) have played a
prominent role in improving financial returns and
enhancing the bank's overall profitability. The number
of ATMs reached approximately (95) in 2023, while the
number of mobile points of sale (POS) reached
approximately (126), resulting in a profit margin of
approximately (66.44)% in the same year. 2. Analysis of
the profitability indicators of the National Bank of Iraq
for the period (2015-2023)
Table (5) Profitability indicators of the National Bank of Iraq for the period (2015-2023)
Years
Return on Assets%
Return on
Equity%
Return on
available
funds%
Profit Margin%
2015
0.78
1.59
1.41
11.21
2016
0.4
0.82
5.39
52.58
2017
0.49
1.04
6.3
7.96
2018
1.5
-
3
-
1.7
-
5.6
-
2019
1.47
3.57
1.79
26.53
2020
0.22
0.65
2.74
3.68
2021
1.43
0.82
6.06
3.14
2022
1.39
8.26
8.22
17.78
2023
4.77
37.61
23.51
45.64
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The researcher prepared the table based on data from
Appendix Table No. (2).
These indicators in Table (5) show a significant
development in financial performance over recent
years, with fluctuations in some years. In 2015, the
return on assets, return on equity, and return on
available funds were relatively low, with the return on
assets recording 0.78% and the return on equity at
1.59%, reflecting moderate banking performance.
Over the years, the indicators have shown significant
improvement, with return on assets reaching 1.74% in
2019 and then jumping to 4.77% in 2023, indicating a
substantial improvement in the efficiency of using
assets to generate returns. Despite this improvement,
2020 witnessed a considerable decline in some
indicators due to the repercussions of the COVID-19
pandemic. Return on assets and equity declined
significantly, with return on equity declining to 0.56%.
However, in 2023, the bank recorded a significant
return improvement, with the return on equity
reaching approximately 37.61% and the return on
available funds reaching approximately 23.51%,
reflecting an improvement in the quality of
investments and increased profits.
The notable increase in 2019 (26.53%) and the
significant increase in 2023 (45.64%) in the profit
margin index demonstrate the bank's ability to improve
profit margins effectively despite the significant
fluctuations experienced in some years.
To analyze the impact of banking services (referred to
in the previous section) on these indicators at the
National Bank of Iraq, the effect is noted: the increased
reliance on digital technologies, such as automated
teller machines (ATMs), point-of-sale (POS) services,
and mobile sales (POC), has significantly contributed to
enhancing the bank's efficiency and raising profitability
indicators. This increase in banking services has also
been reflected in an improvement in the digital
payments system, which has contributed to the rise in
the volume of financial transactions and, consequently,
in banking revenues.
3. Analysis of the profitability indicators of the Middle
East National Bank for the period (2015-2023)
Table (6) Profitability indicators of the Iraqi Middle East Bank for the period (2015-2023)
Years
Return on Assets%
Return on
Equity%
Return on
available
funds%
Profit
Margin%
2015
0.98
2.39
1.09
15.27
2016
1.79
4.23
2.18
27.1
2017
0.08
-
0.2
-
0.1
-
2.16
-
2018
0.29
-
0.8
-
0.3
-
1.4
-
2019
0.1
-
0.3
-
0.48
-
4.8
-
2020
0.03
-
0.08
-
0.4
-
0.9
-
2021
0.03
-
0.03
-
2.2
-
0.69
-
2022
0.42
1.30
0.98
7.16
2023
0.98
-
2.66
-
2.09
-
21.76
-
The Tablercher prepared the table based on data in
Appendix (3).
It is clear from the data in Table (Tableat) that this bank
is among the banks in the sample with the most
declining
profitability
indicators.
Since
2017,
profitability rates have been negative, as shown in
Table. This is due to two factors. The first is a general
reason, as this period is one of security and political
instability, global economic recession, and the COVID-
19 pandemic crisis ravaging all aspects of human life
(Middle East Iraqi Investment Bank, 2020, p. 1310). The
second factor is the result of the decline in the volume
of investments in the bank and the decrease in the
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International Journal of Management and Economics Fundamental (ISSN: 2771-2257)
volume of cash credit during the years (2016-2023),
compared to the increase in the volume of expenses
and the decline in the volume of revenues in recent
years, especially in 2023, as the bank incurred net profit
losses of (-6,702,000%) in this year (see: Middle East
Iraqi Investment Bank, 2023, p. 1310). Miscellaneous).
This negatively impacted the return on assets (-0.98%),
return on equity (-2.66%), return on available funds (-
2.09%), and profit margin (-21.76%).
To analyze the impact of banking services (mentioned
in the previous section) on these indicators at Middle
East Bank, it is noted that the number of ATMs, POS and
mobile POCs, and the number of electronic cards had
no positive impact, as evidenced by the negative results
of the profitability indicators in the table especially in
recent years. This is despite the gradual increase in
these services, which has been modest compared to
the services provided by other banks. Furthermore, the
increase has not met the requirements of the local
market. Based on the above, electronic banking
services, especially ATMs, points of sale, and electronic
card services, have positively impacted profitability
indicators in some banks, including the National Bank
of Iraq and the National Bank of Baghdad. Their
importance has diminished or had no positive impact
on the National Bank of the Middle East. Expanding the
National Bank's digital infrastructure has reduced costs
and increased operational efficiency, improving
profitability.
Regarding
compatibility
with
economic
and
technological realities, these services are fully aligned
with global trends in the banking sector.
Transformation has become inevitable in the current
era as financial institutions strive to provide
convenient, fast, and secure services to customers,
enhancing their competitiveness in the market.
Furthermore, leveraging digital infrastructure helps
banks keep pace with global economic transformations
that are driving a reduction in reliance on cash and
stimulating digital transactions.
CONCLUSIONS
1. The study sample's banks provide electronic banking
services differently in terms of their use of modern
technology, as demonstrated by the relationship
between electronic banking services and banking
profitability indicators.
2. The banks in the study sample rely on modern
technology in the electronic banking services industry,
and banking profitability indicators increase positively
with increased use of all three types of electronic
banking services.
3. The results of the description and analysis of the ATM
index showed that the National Bank of Iraq recorded
the highest arithmetic mean and was the best in terms
of service provision, with an arithmetic mean of
approximately (107.7) machines, followed by the Bank
of Baghdad and the Middle East Bank with (55.1, 30.3)
as an arithmetic mean for ATMs, respectively, during
the study period.
4. The results of the description and analysis of the POS
index showed that the National Bank of Iraq was the
best in terms of service provision, with an arithmetic
mean of approximately (84) points of sale during the
study period. It was followed by the Bank of Baghdad
with (46.3) points of sale and the Middle East Bank with
(43.7) points of sale.
5. The results of the description and analysis of the POC
cash payment devices index showed that the National
Bank of Iraq performed best in terms of service
provision, with an arithmetic mean of approximately
5,188.9 POS points loaded for cash payments. The
Middle East Bank followed with 122.11 points, and then
the Bank of Baghdad with 86.2 POS points.
6. The results of the description and analysis of the
number of electronic cards index showed that the Bank
of Baghdad performed best regarding the number of
cards issued, with an arithmetic mean of approximately
119,985.3 cards. During the study period, the
arithmetic mean for the National Bank of Iraq and the
Middle East Bank was approximately 27,858.7 and
15,500.1 cards. 7. Profitability indicators at the
National Bank of Baghdad improved during the study
period. This was due to the significant improvement in
the number and quality of electronic banking services,
which contributed to operational efficiency and
increased production. Automated teller machines
(ATMs) and mobile points of sale (POS) played a
prominent role in improving financial returns,
contributing to the bank's overall profitability.
8. The National Bank of Iraq's banking profitability
indicators showed moderate progress in financial
performance over recent years, with fluctuations in
2018. Increased reliance on digital technologies, such
as automated teller machines (ATMs), point-of-sale
(POS) services, and mobile point-of-sale (POC),
significantly contributed to enhancing the bank's
efficiency and profitability indicators. This increase in
banking services was reflected in an improvement in
the digital payments system, which contributed to the
rise in the volume of financial transactions and,
consequently, in banking revenues.
9. The profitability indicators of the Middle East Bank
showed a significant decline, making it one of the banks
in the sample with the highest profitability declines.
Since 2017, profitability rates have been negative. This
is due to two factors: the first is that this year was
International Journal of Management and Economics Fundamental
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International Journal of Management and Economics Fundamental (ISSN: 2771-2257)
marked by security and political instability, a global
economic recession, and the COVID-19 pandemic,
which has disrupted all aspects of human life. The
second factor is the decline in the volume of
investments in the bank and the decline in the volume
of cash credit during the years (2016-2023), compared
to the increase in expenses and the decrease in
revenues in recent years.
10. Regarding compatibility with economic and
technological realities, these banking services are fully
aligned with global trends in the banking sector. This
transformation has become inevitable in the current
era, as financial institutions seek to provide convenient,
fast, and secure services to customers, enhancing their
competitiveness in the market. Furthermore,
leveraging digital infrastructure helps banks keep pace
with global economic transformations that are driving
a reduction in reliance on cash and stimulating digital
transactions.
Recommendations
1. Iraqi banks should be informed of the quality of
electronic banking services provided by developed
countries so that they can benefit from modern
technological and financial methods used to provide
distinguished services to the public in Iraq.
2. The banking sector, in general, should be encouraged
to take measures to enhance electronic payment
operations by assigning a special weighting when
evaluating banks according to the CAMELS assessment.
3. Encouraging, supporting, and educating the public
about the use of electronic payment methods will
increase financial inclusion.
4. Iraqi private commercial banks in general, and the
banks included in the study sample in particular, should
increase the number of ATMs, POS and POC points of
sale, and electronic cards to reach all members of
society, especially in remote areas, with the aim of
expanding the geographical area they serve.
5. The banks in the selected sample should work to
introduce modern and advanced methods to improve
electronic banking services, enabling them to compete
with other commercial banks and thus attract and
retain a larger number of customers, therefore
achieving high financial returns for the banks.
6. Reducing risks in providing electronic banking
services to employees by providing them with training
courses on how to deal with technical problems.
7. Reducing the cost of banking services and reducing
traditional banking red tape helps commercial banks in
general, and the sample banks attract the largest
number of customers, positively impacting their
competitiveness and profitability.
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