THE DYNAMICS OF INDONESIA'S DIGITAL BANKING BUSINESS ENVIRONMENT: A CONCEPTUAL PESTEL ANALYSIS INTEGRATED WITH DYNAMIC CAPABILITIES AND INSTITUTIONAL THEORY
DOI:
https://doi.org/10.5281/zenodo.23321529Abstract
The Indonesian banking industry is undergoing a structural transformation driven by the acceleration of financial services digitalization, changes in customer behavior, competitive pressure from financial technology (fintech) players, and the strengthening of the regulatory framework by the Financial Services Authority (OJK) and Bank Indonesia (BI). This conceptual article aims to develop a theoretical analysis framework that integrates PESTEL Analysis with Dynamic Capabilities as a grand theory and Institutional Theory as a supporting theory, in order to understand the dynamics of the digital banking business environment in Indonesia in a more comprehensive and multi-layered manner . This study uses a narrative-systematic literature review approach that refers to the Tranfield, Denyer, and Smart (2003) protocol and the PRISMA transparency principle (Page et al., 2021), by examining and synthesizing indexed academic literature, official regulatory documents, and statistical data from Indonesian financial authorities for the period 1967 to 2026. The results of the study show that the six PESTEL dimensions, namely political, economic, social, technological, environmental, and legal, are intertwined to form institutional pressures that are coercive, mimetic, and normative (DiMaggio & Powell, 1983), which in turn encourages banking organizations to build dynamic capabilities through the processes of sensing, seizing, and transforming (Teece, 2007). This article produces an integrated conceptual model of PESTEL-Dynamic Capabilities-Institutional Theory that can be used as an analytical roadmap for further doctoral research on banking digitalization in Indonesia, while providing managerial implications for bank management and policy makers in designing legitimate, resilient, and sustainable adaptive strategies amidst the ever-changing business environment.
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