Weight-restricted approach on constant returns to scale DEA models: Efficiency of internet banking in Turkey

Abstract

The performance measurement of decision-making units (DMUs) can be optimised by strategically choosing the optimal input and output weights. This approach circumvents the potential complexities associated with establishing a common basis for ranking homogeneous units and managing the results from multiple efficient frontiers. Efficient frontier ranking is simplified by limiting the weights based on the intrinsic or technical connections between relevant inputs and outputs. It also creates a coherent framework that coordinates various considerations across all under-evaluated DMUs and variables. This method effectively examines the complexities related to the inputs and outputs of homogeneous units using conventional data envelopment analysis (DEA) models to evaluate the efficiency of these units. In the banking sector, the relationship between inputs and outputs is complex. This complexity requires careful attention, particularly in cases where the existence of one input or output is conditional on the existence of another. This dynamic is accentuated by the integration of advanced fintech solutions, which inherently provide significant benefits to banking operations. The use of appropriate analytical models for banking data is important. The synergy between advanced financial technologies and analytical methods has reached its peak in reducing losses and strengthening profits. This, in turn, facilitates the optimal allocation of financial resources to growth-oriented projects. The empirical application of weight-restricted DEA models to Turkey's mobile-internetbanking sector underscores their efficacy. These modified models contrast with the standard DEA versions, which often encounter challenges stemming from the allocation of weights to pivotal variables. This study demonstrates the tangible benefits of our approach and its potential to revolutionise the efficiency assessment landscape in the banking sector. The proposed unconventional model which is applied to Turkish Internet banking for the period extending from 2006 to 2018 and which takes a comprehensive weight restriction approach to DEA and encompasses all relevant input and output variables, resulted in strictly positive weights and a reduced count of inflated efficient units along with their scores. This is practically beneficent to banking sector in so far as it facilitates decision-making and related economic and financial planning, and as it proves to be a reliable benchmark by local or international banks intending to provide or develop Internet banking services.