The impact of digitalization on the banking sector: Evidence from fintech countries

Abstract

Banking services are now branded and are provided in distinct ways. It has been proven that the development of new financial services and products substantially impacts bank performance. This paper investigates the effect of e-banking services on the performance of banks before the pandemic. The study looks at a sample of 24 nations, including leading fintech nations. Data from 2012 to 2019 was gathered from the World Development Indicators and the Bank for International Settlements (BIS) databases. The findings show a significant positive correlation between cashless payments and banks' ROA. The performance of a bank is significantly impacted by mobile subscribers. In fact, customers are willing to use mobile transactions in place of traditional bank accounts. Banks' ability to generate revenue from assets (in the form of credits) is consequently restricted, which has an impact on their ability to earn a profit. The research suggests a range of policy implications and policy interconnections between digital financial services, banking stability, and efficiency. The banking sector has become more digitalized after the recent pandemic. To date, there is very little literature that has focused on the effect of digitalization on the banking sector before the Covid-19 crisis. The current study contributes to the literature by providing an overview of the relationship between the banking industry and digitalization before the latest pandemic for some leading fintech countries. This research will contribute to later comparisons between the different situations of the banking sector pre- and post-pandemic.