Analysis of banking competition in Indonesia and its impact on profitability: Structure conduct performance (SCP) approach

In the past decade, profits obtained by banks in Indonesia have generally tended to increase, except during pandemic. However, number of banking business actors has continued decline, indicating that structure is becoming more concentrated and potentially leading an oligopoly. Therefore, purpose this study determine whether increasingly market or weak competition a significant impact on growing profitability Indonesia. If hypothesis proven true, it would suggest banking, as financial intermediary, contributes higher costs for economic development, particularly within markets. study, Lerner index employed measure level concentration among banks. Subsequently, Treatment Effect Model utilized estimate extent levels sector. The findings reveal two key points. Firstly, reduction players been accompanied increased Indonesia, evident after 2016. Secondly, reduced corresponds opportunities profitability. Consequently, there are indications decrease correlated with heightened competition, suggesting improved efficiency management. This phenomenon could elucidate reason why sector appears be rise despite players.