The future of banking: What are the actual barriers to bank digitalization?

Abstract

The banking sector must confront challenges arising from globalization, the demand for new business models (BMs), increasing regulation, and ever-advancing digitalization. In this context, innovative competitors, namely FinTechs, are challenging banks and forcing them to rethink existing strategies and structures. In particular, the digital transformation of BMs that have been in place for decades represents a major challenge for companies and their executives. In this article, 407 German bank representatives were surveyed to identify, quantify, and analyze implementation barriers in the context of bank digitalization from a decision-maker’s perspective. By applying structural equation modeling, the authors quantified a variety of barriers and tested their influence on the degree of digitalization at banks. The study uncovered structural relationships between barriers expressed as observed variables— personal involvement, strategic corporate management, technology and regulation, and employees—and the degree of digitalization as a latent variable of banks. The findings increase bank practitioners’ understanding and awareness of barriers to digitalization and contribute to the field of bank digitalization. JEL Classification: G21, M1, O33