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International Journal of Quality and Service Sciences

ISSN : 1756-669X

Article publication date: 4 February 2022

Issue publication date: 3 May 2022

This study aims to demonstrate digital banking’s influence on customers’ evaluation of service experience and develop a framework identifying the most significant variables of digital banking that influence the financial performance of banks.

Design/methodology/approach

This structured review of literature, guided with the preferred reporting items for systematic reviews and meta-analyses framework, takes a digital banking perspective to identify 88 articles published between 2001 and 2021, examining distinct aspects of digital banking and their impact on financial performance.

Customer experience (CE) is determined by functional clues (functional quality, trust and convenience), mechanic clues (website attributes, website design, perceived usability) and humanic clues (customer complaint handling). The study is furthered to combine CE with the service profit chain model. This study also fills the gap to understand the use of “gamification” in technology-driven banking services to enhance CE. Finally, an integrative framework is proposed to link technology-related factors (digital banking clues and gamification), customer-related factors (CE, customer satisfaction and customer loyalty) and performance-related factors (financial performance).

Practical implications

The study conceptualises a “total” CE framework that banks can use to enhance their online presence. Banking service providers could also analyse their financial results based on digital banking’s impact on customers. Besides, banks can use this framework to strategically place “game-like features” in their digital platforms.

Originality/value

This study attempts to significantly contribute to the digital marketing literature related to CE with banks. It is one of the first studies to determine gamification explicitly in banking literature.

• Customer experience
• Digital banking
• Customer satisfaction
• Customer loyalty
• Financial performance
• Gamification
• Internet banking

Acknowledgements

Funding: Authors have not received any funding support to complete this work.

Conflict of interest statement: The authors declare that they have no conflict of interest.

Chauhan, S. , Akhtar, A. and Gupta, A. (2022), "Customer experience in digital banking: a review and future research directions", International Journal of Quality and Service Sciences , Vol. 14 No. 2, pp. 311-348. https://doi.org/10.1108/IJQSS-02-2021-0027

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• Open access
• Published: 07 July 2023

Unlocking the full potential of digital transformation in banking: a bibliometric review and emerging trend

• Lambert Kofi Osei   ORCID: orcid.org/0000-0001-7461-4839 1 ,
• Yuliya Cherkasova 2 &
• Kofi Mintah Oware 1  

Future Business Journal volume  9 , Article number:  30 ( 2023 ) Cite this article

8528 Accesses

5 Citations

Metrics details

Every aspect of life has been affected by digitization, and the use of digital technologies to deliver banking services has increased significantly. The purpose of this study was to give a thorough review and pinpoint the intellectual framework of the field of research of the digital banking transformation (DBT).

Methodology

This study employed bibliometric and network analysis to map a network in a single study, and a total of 268 publications published between 1989 and 2022 were used.

Our findings demonstrate that the UK, USA, Germany, and China are the countries that have conducted most of the studies on the digital banking transformation. Only China and India are considered emerging economies; everyone else is looking at it from a developed economy perspective. Additional research reveals that papers rated with A* and A grades frequently publish studies on digital banking transformation. Once more, the analysis identifies key theoretical underpinnings, new trends and research directions. The current research trend points toward FinTech, block chain, mobile financial services apps, artificial intelligence, mobile banking service platforms and sustainable business models. The importance of emphasizing the need for additional research in these fields of study cannot be stressed, given the expanding popularity of blockchain technology and digital currency in the literature.

Originality

It appears that this is the first study that examines the theoretical studies of digital banking transformation using bibliometric analysis. The second element of originality is about the multiple dimensions of the impact of technology in the banking sector, which includes customer, company, bank, regulation authority and society.

Introduction

The advent of information communication technology (ICT) is believed to have caused a paradigm shift in all aspects of human life. Technology has therefore become a necessary, unavoidable demand for society and the business environment, from work automation to service digitalization, from cloud computing to data analytics, from virtual collaboration to smart homes. Almost every industry is undergoing constant transformation because to technology. In the past 20 years, digitalization has had an impact on a variety of sectors, presenting fresh business prospects and encouraging new systems of innovation [ 1 ].

The finance sector is actively experimenting and inventing with the power of technology's digitization. It is also one of the industries that have successfully embraced digitization. One of the most laudable digital developments of the finance sector is the widespread adoption of digital banking over traditional banking methods. Recently, potentially disruptive technological breakthroughs and Internet-based solutions appear to have been introduced to the banking industry, one of the most established and conservative sectors of the economy. Digital transformation in banking is essential to enhance how banks and other financial organizations learn about, communicate with and satisfy the needs of customers. An effective digital transformation starts with understanding digital client behavior, preferences, choices, likes, dislikes, and stated and unstated expectations, to be more precise. Many academics are interested in how information and communications technology is advancing and how it can affect the banking industry [ 2 ]. However, the bibliometric analysis conducted by academics utilizing VOS viewer is assumed to be the first to look at the digital banking transformation (DBT) studies from a performance analysis and science mapping perspective.

Large data sets from databases like Web of Science, Scopus index or Dimension are permitted for bibliometric study. The bibliometric analysis moves the banks' digital transformation survey from single to multi-dimensional outcomes. A quick search of DBT studies shows that the first journal was published in 1989, despite the earliest forms of digital banking being traced back to the advent of ATMs and cards in the 1960s. The quantum of increase after 2014, amounting to 203 articles, representing 76% of all published articles on the topic, compels this study to focus on this field of DBT studies. We contend that establishing the area's intellectual framework is more crucial than ever. As a result, we make a contribution by offering a relevant, distinctive and significant intellectual map of the literature on digital banking studies through quantitative and bibliometric analysis. In mapping the intellectual structure of DBT, our study sets out to address the following critical research questions:

Who are the predominant contributors (publication by year, journals, publishers, authors, publication, journal quality, country, and universities) to the DBT theory?

What are the country's collaboration and citation analysis of the impact of digitalization on banks?

What is digital banking theory's intellectual foundation (co-citation)?

What are emerging research themes/trends and future direction (bibliography coupling

and keywords analysis) to digital banking theory?

In response to the above four questions, this study has at least four significant additions to the literature on digital banking. First, we extend and build upon prior assessments of digital banking by offering a factual, quantitative perspective on the theory's historical development across time. Of course, this study considers notable contributors, the intellectual framework and theoretical groundwork of the discipline, the degree to which individuals are connected, and thematic subdomains. We show how digital banking has advanced by evaluating the significant offshoots from the original work by [ 3 ]. Second, we objectively assess how faithfully emerging subtopic literature streams acknowledge and build upon Burk and Pfitzmann’s seminal works. As a result, our paper is uniquely suited to detect significant gaps that might exist in subtopic areas, and we offer suggestions for improving literature unification. Thirdly, we show how scholars of digital banking have historically changed their study goals over time in response to gaps between theory and practice in order to determine how faithfully they have addressed these gaps. Finally, we contribute to the digital banking literature by identifying emerging digital banking research and study trends. Overall, we think that our research exposes chances to grow more effectively and collaboratively in the future by highlighting well-traveled roads that previous researchers have taken, identifying potential cracks that may leave the literature in a state of disarray, and so forth [ 4 ].

This study used bibliometric and network analysis to map a network that comprises authors, co-authors, keyword occurrences, journal citations and author names in a single study. The approach can give a thorough overview and pinpoint the field's intellectual hierarchy [ 5 ]. Furthermore, according to [ 6 ], bibliometric approaches are suitable for mapping the academic structure of a certain area because doing so enables researchers to recognize "'what,' 'where' and 'by whom' founded the field. We carry out a thorough bibliometric evaluation to meet the research objectives by carefully extracting the sample literature using the proper inclusion and exclusion criteria and selecting the search string. The first stage involved a descriptive analysis, while the second stage involved a comprehensive bibliometric analysis. Utilizing VOSviewer and Rstudio assistance, citation and co-citation analyses were carried out to determine the intellectual structure of the study on digital banking studies. Weighted citation measures were used to identify the lead publications from the clusters.

The format of our paper is as follows: A brief theoretical overview of the DBT literature, including its core principles, significant developments and limits, is given in section " Theoretical background ." Section " Methods " describes the research approach in depth, and section " Results " shows the results of our investigation. The limitations of our study and their consequences for theory and practice are discussed in section " Discussions and future research agenda ." Finally, we provide our final observations in section " Conclusion ."

Theoretical background

Society, economics, banks and banking are changing as a result of technological advancement. Banks are an unneeded remnant whose purpose is best provided by alternate arrangements, even though we still need banking. The value chain of traditional banking has been disintermediated by technology, and its business model has been severely altered. As a result, Fin-Tech adoption and digital technology collaboration are widespread, constant and profoundly changing company structures [ 7 ]. Nearly 90% of banks fear losing business to Fin-Tech, which has replaced traditional value chains with shorter multi-modal and multi-directional nodes, according to KPMG's 2017 annual reports. Digitalization permeates the contemporary world, and the banking industry is no different. Our lives seemed to have grown so ingrained with digital technology that we would feel empty without it. Banks of all sizes are investing a lot in digital initiatives to maintain their uniqueness and meet as many of their customers' needs as possible. Digitalization leads to more customization and closer to customers. It is called digital banking when a bank renders its services online, and customers can make transactions and other activities online. Since over 73% of consumers use products from numerous platforms, Lee and Shin [ 8 ] highlight that bank model disruption and ascribe this to ongoing innovation followed by disruptive challenges, with the possibility of losing market share to Fin-Techs omnipresent.Mobile technologies and social media digitize bank value chains simultaneously addressing and influencing client demands and expectations.

However, according to our knowledge, not much research has been done on the banking sector. Nevertheless, it is well known that the banking sector, which is frequently IT-intensive, requires special consideration due to its significance for the whole economy. Berger [ 2 ] emphasizes that the benefits of technology adoption may not convert into improved production, which is consistent with the literature mentioned above. According to Berger, rather than the organization itself, the advantages of technology might be passed on to consumers and other production-related elements. Sharing data allow banks to process information more efficiently while also achieving huge economies of scale in the processing of payments. For instance, banks have reportedly employed information processing to handle deposit and loan client information as well as to more accurately assess risks, according to Berger and Mester. Additionally, they have employed telecommunications technologies to expeditiously process payments and disseminate this data while consuming fewer resources (2003, p. 58). This would imply that cost productivity increased in the 1990s.

Digital transformation has an impact on business processes and alters how banks conduct operations. A contributing aspect to the traditional relationship between customers and banks is digital transformation. Customers in particular have the right to use a variety of communication channels to engage in active and convenient engagement with banks and other customers via online customer support services. Most importantly, digital transformation enables banks to service a variety of consumers simultaneously, enhancing the bank's operational efficiency. In addition, the employee's job procedures are digitalized, reducing time and resources for both human resources and transaction execution. Thus, the bank will benefit from digital transformation by increasing output (raising the number of clients) and decreasing input expenses (reducing the number of employees and the time to make transactions).

The banking and FinTech industries will expand further in joint ventures, mergers and acquisitions toward convergence among banks, FinTech and technology organizations, and social media network providers as the new decade gets underway [ 9 ]. Digital technologies including blockchain, artificial intelligence (AI), data platforms, cybersecurity regulation technology and strategic collaborations will be well positioned to be retained in the banking business in a completely digitally changed financial environment [ 10 ]. Up until the advent of digital banking and the branch-based banking model in the early 1990s, traditional banking remained unaltered and unopposed. In the USA, Stanford Federal Credit Union opened the first online bank in 1994. The number of local bank branches has substantially decreased globally with the advent of online banking. Globally, the number of digital banks has been steadily rising at the same time. The first digital disruptor was ING Direct, which launched as an entirely online bank in 1996 and over the course of a little more than a decade attracted more than 20 million customers in nine countries without having to make any investments in physical infrastructure. In 2013, the FinTech bank "N26" received initial approval for a banking license. Amazon introduced an e-commerce-based checking account feature in 2021, while Facebook developed a social network-based banking service in 2020. By 2020, banking clients have been accustomed to using mobile banking apps, direct deposit to P2P payments and cloud-based banking platforms with AI.

To address our research issues in the present study, we employed two bibliometric analytic techniques. Since bibliometric analysis is quantitative, systematic, transparent and repeatable, it is strongly recommended for mapping the intellectual architecture of a literature stream [ 11 ]. The specifics of our research methodology and key conclusions are shown in Fig.  1 .

Flow chart of searching strategy and data collection process

To achieve its goals, this study suggests using publications and citations to analyze the performance of authors, institutions, countries and journals. Another unique approach used in this study is known as scientific mapping. Co-authorship analysis, clustering, citation analysis and keywords analysis are the approach factors [ 5 ]. Bibliometric approaches have been applied in recent investigations [ 12 , 13 ]. Then, we employ it to start the process of developing a bibliometric investigation [ 5 ]. The following actions are a part of the four-step process: data gathering and analysis, selecting the limiting criteria, data analysis, discussions and conclusions.

Defining the search terms

We started by conducting a methodical keyword search of the current literature on digital banking [ 14 ]. We extracted data from the Scopus index database. According to [ 15 ], Scopus has a larger journal than any other service that conducts data mining. As a result, this study made use of this database to mine data for its bibliometric analysis. To identify digital banking impact articles, we used the keyword methodology outlined by scholars who have recently conducted reviews of DBT. By concentrating primarily on work that has undergone thorough peer review, we aimed to maintain the academic integrity of our sample. Conference transcripts and book chapters were taken out of the analysis. Additionally, we excluded any non-English-language publications; 298 articles make up our final sample, which is deemed adequate for bibliometric study. These articles were published between 1989 and 2022. The keys words are: digital, bank, banking, business model, company, finance, economics and social sciences.

Keyword protocol applied in Scopus for extracting articles.

Data search and collection

As a result of several authors using the Scopus database for bibliometric analysis, it was chosen as the database from which the study's data were extracted [ 12 , 13 ]. In comparison with Web of Science and Dimension, the Scopus database has many indexed journals. The first stage of data extraction involved 295 publications with the titles "effect of digitalization on banks" and "digital transformation of banks" in June 2022. The following stage of the data processing was restricted to 268 English-language journals. The research is restricted to publications in the fields of banking, business management, accounting, economics, econometrics and finance. The last research search turned up 268 papers that were written between 1985 and 2022. Our literature review and bibliometric analysis are built on the foundation of the sample size of 268 articles. The method of data extraction is displayed in Table 1 .

This study raises different research questions covering contributors to DBT or impacts of digitalization on banks and banking, average journals and journal quality citation, digital banking intellectual foundations (co-citation), emerging research themes/trends and future direction (bibliography coupling and keywords analysis) in institutional theory.

Who are the predominant contributors to digital banking theory

This study responds to the first research question by addressing the dominant contributors to the DBT theory by using the following criteria: publication by year, journals, publishers, authors, publication, journal quality, country, and universities.

Publication by year

Figure  2 illustrates the number of DBT publications between 1989 and early 2022, recording 268 scientific publications. DBT received little attention from the scientific community in the early years from 1989 to 2005, recording as little as seven publications. The available data further show that publication increased slightly to sixty-seven (67) over a twenty (20) year period from 2006 to 2016. However, there was a dramatic change in this trend afterwards. Approximately 72 percent of these scientific publications, representing one hundred ninety-four (194) articles, occurred in the last six years. The figure further revealed that the years 2020 and 2021 alone accounted for 43 percent of all scientific publications in the field of DBT. Perhaps the havoc of Covid–19 and the strategic role of banks in successfully influencing the payment system architecture in particular resonated well with researchers to pay much attention to the field around this later period. While the quantity of publications has increased, publications within elite journals continue to grow. As recently as 2017, more over 40% of DBT research was published in prestigious publications. In fact, since 2017, the average annual proportion of publications in the top tier to all publications is 62 percent. As a result, our findings imply that the standard of published research has generally kept up with the volume of publications.

Trends in digital banking publication since 1989

Publication activity by country

Our findings also show that DBT research has a truly global reach, as shown by the participation of authors from 65 different countries. Figure  3 gives a graphic representation of the top countries publishing DBT research. For better clarity, the study limited Fig.  3 to cover countries with more than five publications. Although the publication of digital banking is international, it is interesting to notice that a significant portion of the work originates from a limited group of wealthy nations. More specifically, more than 46% of all published DBT studies come from the USA, UK, India, China, Germany, Netherlands, Hon Kong, Romania, Finland, Poland, Ukraine, Italy and Spain. Only China and India are from emerging economies. Figure  3 illustrates publication activities by country.

Top publishing countries on DBT

Publishing activity by journal

Two hundred thirteen different journals published the 268 articles in our sample. Table 1 lists the top publishing Journals. Based on publication count, we found that the leading journals for DBT include Financial Innovation, Journal of Cleaner Production, Journal of Economics and Business, International Journal of Information Management, Journal of Information Technology and Sustainability Journal. Our observation revealed that even though the Journal of Financial Innovation had only two publications, it claimed the top spot with two hundred and twelve citations total citation, given an average citation of one hundred and six. This study also used Australian Business School Council (ABDC) rating & ranking. Journal quality is rated and ranked by ABDC, with A* being the highest-quality journal, followed by A and B as the second- and third-best journals, respectively. According to the ABDC ranking, journal C is the lowest ranked. The data available to us have shown that the high-quality journals in class A and A* are publishing works on digital transformation. Three of the top five journals in our data are in the A class.

Publishing activity by author and organization

According to [ 16 ], bibliometric methodologies can be used to evaluate the intellectual influence of universities and their research personnel. To determine the sources of digital transformation in banking, we assessed the research output of individual academics and institutions. We found 598 distinct writers from 224 organizations publishing on the subject of banking digital transformation inside our dataset. The top publishing scholars and institutions are listed in Tables 2 and 3 . The descriptive statistics also show that [ 17 , 18 , 19 , 20 ] are the authors with the highest citation. In addition, the Financial University under the government of the Russian Federation, Comsats University—Islamabad, National Chiao Tung University—China and the State University of Management—Russia are the top four.

Country collaboration and citation analysis

Country collaborations of co-authors analysis.

The UK is the most productive nation in terms of publishing changes in digital banking. Australia, Canada, Indonesia and the Russian Federation have the lowest populations. Figure  4 demonstrates that, with seven linkages and 18 times as many co-authorships, the UK has the highest level of collaboration. Countries like China, Hong Kong and the Netherlands, each with six links, tie for second place. The inflow of overseas students completing second and third degrees in the UK and the US may be one reason there are more significant connections between the two countries [ 21 ]. Additionally, the UK and China are two other significant technology superpowers laying the groundwork for digitization. This might have inspired and drawn academics to carry out studies in the area.

Country collaboration of co-authors analysis

Citation analysis

The most read articles in the field of research on DBT were found through citation analysis. Citation analysis examines the connections between publications and finds the most significant publications in a given study area [ 5 ]. Similar studies that used citation analysis based on the Scopus database have also been looked at research [ 21 ]. The authors' and the study's primary focus are analyzed based on their citations in Table 4 . The Financial Innovation Journal and Journal of Cleaner Production publish the most-cited article. Liu et al. [ 22 ] and Yip et al. are the authors of these articles [ 23 ]. Even though publications on the evolution of digital banking began in 1989, the most highly cited papers are in 2016 and 2018, respectively.

Cluster analysis (results of reference co-citation analysis with reference map)

By conducting the co-citation analysis of references as previously described and grouping the references cited by papers on DBT into clusters, we next looked at the intellectual foundation and structure of the DBT to answer the third research question. The 268 papers in our sample used 8720 different references in total. Our examination of co-citations revealed five interconnected clusters with a total of 67 articles. At least 20 of the 268 papers in our sample, which contained all 67 of these reference articles, collectively cited them. In other words, these 67 publications are the quantitatively most significant references in the literature on the shift of banking into the digital age. Similarly, we used the weighted citation count provided by VOS viewer to ensure high-quality articles in cluster analysis. We looked at the top 5 articles in each cluster as presented in Table 5 , to find a common topic, and we labeled each theme accordingly, following [ 24 ]. We summarize the findings of the five most influential studies in each cluster. In the following sections, we give a quick overview of these reference clusters and how they integrate into the larger framework for digital banking (Fig. 5 ).

Co-citation network of the reference map

Cluster 1: Digital banking innovation

A cluster that established its boundaries improved its theoretical relevance and defined it as the first and most noticeable cluster to arise. Therefore, it makes sense that [ 25 ] are the most important tenet of this fundamental research stream. In 2022, digital transformation will continue to be a crucial trend in banking. The financial services sector is slowly changing as a result of technology, just like how it has affected other economic sectors. Physical bank branches have historically served as the primary point of contact for facilitating customer and retail banking transactions, according to [ 25 ]. Customers are continuing to transition from in-person to digital transactions as technology advances because of a complementary influence brought about by more access to digital banking services and an improved experience of new digital access, goods, services and functionality. They have developed a novel mapping technique for FinTech developments that assesses the extent of changes and transformations in four subfields of financial services: operations management, technological advancements, multiple innovations, and blockchain and other FinTech innovations. According to [ 26 ], the current wave of mergers and acquisitions in the financial services sector, combined with the broad availability of sophisticated technology, has increased competitiveness in the sector. Also, Henseler et al. [ 27 ] used discriminant validity assessment analysis to establish relationships between latent variables in business transformation. The digital banking revolution cannot go without challenges. All innovations encounter client resistance, claims [ 28 ] tested hypotheses using binary logit models comparing mobile banking adopters versus non-adopters, mobile banking postponers versus rejecters and Internet banking postponers versus rejecters using data from two comprehensive national surveys conducted in Finland ( n  = 1736 consumers). The value barrier is the main obstacle to the adoption of online and mobile banking, according to the study's findings. He also discovered that age and gender strongly influence decisions to adopt or reject. When [ 29 ] looked at the effect of cognitive age in explaining older people's resistance to mobile banking, they discovered that traditional and image barriers had an impact on usage, value and risk. All impediments, in turn, have an impact on resistance behavior. Furthermore, cognitive age was found to moderate these relationships. In order words, younger elders have limited or no resistance to DBT as opposed to elderly ones. All writers in this cluster agree that technology and evolving customer demands dramatically affect how banks operate in the twenty-first century. Indeed, the coronavirus outbreak has made it clear that banking institutions need to speed up their digital transitions. But the banking sector needs to modify its business models for front-facing and back-office operations to keep up with the changes and avoid potential upheavals. True digital banking and a complete transformation are built on implementing the most recent technology, such as blockchain cloud computing and Internet of Things (IoT).

Cluster 2: FinTech and RegTech in Banking

Scholars in this cluster preoccupied themselves with the concept of FinTech (Financial Technology) and RegTech (Regulatory Technology) thus the application of emerging technology to improve the way businesses manage regulatory compliance). They provided a range of viewpoints to make the disruptive potential of FinTech and its consequences for a more thorough financial ecosystem application in the banking and financial ecosystem easier to understand. Despite the widespread agreement that FinTech will have a big impact on the financial services industry, little academic literature has examined this topic, according to [ 30 ], citing [ 8 ]. Kindly assist with the changes.. Additionally, no accepted definition of FinTech has yet been established. On the other hand, according to Google, the query what is FinTech is presently ranked seventh among the most popular FinTech-related questions (Google, 2016b). He gave the most up-to-date definition of FinTech, which is a new financial business that uses technology to enhance financial activity. Contrarily, RegTech, or regulatory technology, uses cutting-edge tools and methods to assist financial institutions in enhancing their regulatory governance, reporting, compliance and risk management. According to [ 31 ] research, many desirable results might certainly be attained if regulators were willing to implement cultural change and integrate technical improvements with regulation. Such outcomes can include stabilizing the financial system, fostering systemic stability. The disruptive invention by [ 31 ] has the potential to improve consumer welfare, regulatory and supervisory outcomes, and the financial services industry's reputation. According to [ 10 ], the traditional business models of retail banks are seriously threatened by the emergence of digital innovators in the financial services industry. Lee and Shin [ 8 ] who contend that FinTech ushers in a new paradigm in which information technology drives innovation in the financial industry endorse this point of view. FinTech is hailed as a paradigm-shifting, disruptive innovation that has the power to upend established financial markets. The corporate world is quickly digitizing, shattering borders between industries, providing new opportunities and eliminating long-successful business models, according to [ 22 ], who added to the literature. They added that, on the plus side, growing digitalization presents opportunities, including the chance to take advantage of a solid customer connection and boost cross-selling. The dangers are typically precise and immediate, which is a drawback.

Cluster 3: The new digital business model of banks and other financial service providers

The papers in this cluster delved into the business model concept and, to a more significant extent, the new banking business model, which is technology-led. According to [ 32 ], business strategists and academics are paying more attention to business models as they try to understand how businesses create value and function well in order to gain a competitive advantage. Additionally, they argued that the digital economy had given businesses the chance to test out novel systems for networked value creation, where value is collaboratively produced by a firm and a big number of partners for a large number of users. The researchers came to the conclusion that four key themes are emerging, largely centered on the idea of the business model: as a new analytical unit, providing a systemic perspective on how to "do business," encompassing boundary-spanning activities (performed by a focal firm or others), and focusing on both value creation and value capture. These ideas are related and reinforce one another. Chesbrough [ 33 ] says that businesses must use their business models to commercialize novel concepts and technology. While businesses may make significant investments and have elaborate systems for investigating novel concepts and technologies, they frequently lack the ability to develop the business models that would be used to implement these inputs. He proposed that organizations should build the capacity to innovate their business models in order to make sound business decisions. Durkin et al. [ 34 ] did an excellent job investigating social media's role in a bank’s new digitally oriented business model. They suggested that social media had the power to profoundly alter customer-bank relationships and improve how the two sides communicate in the future. Their research shows that a wide range of clients regularly use transactional e-banking services. Loebbecke and Picot [ 35 ] presented a position paper that considers the factors driving how digitization and big data analytics drive the change of business and society. There is also discussion of the potential effects of digitalization and big data analytics on banking or employment, particularly in terms of cognitive work. Although several authors have recently proposed definitions of "business model," Shafer et al. [ 36 ] claim that none of them seem to be broadly recognized. This lack of agreement could be ascribed to the concept's interest from a variety of fields, all of which have connected it to something. To develop business models in the age of digital transformation, there must be an exponential shift in corporate culture and leadership concentration. The authors concur that banking is evolving as a result of a new wave of digital-only firms who are fragmenting the industry, componentizing products, and upending established business models. They claimed that switching from the previous business model to the new one is not the only way to succeed in this adaptable, fluid world. Instead, it will shift away from relying on a single, vertically integrated business model and toward a variety of non-linear models and value chain roles. In actuality, the Covid-19 epidemic has accelerated the development of business ecosystems for digital banking. Opportunities to develop, deliver and realize the value in new ways are made possible by digital technologies. The pipeline concept, the foundation of the classic universal bank, allows it to independently manufacture, sell and distribute products using its internal resources. This vertically integrated pipeline business model is disintegrating, making room for value chains that are becoming more fragmented and chances for new business models. A network of diverse business players from backgrounds including banking, insurance, pension, communications, real estate, education, healthcare service providers and IT are part of the new business model that the researchers have found. They work together to benefit each other through coexisting. The result of these developments and transformation is that financial services will continue to function in innovative and distinctive ways from those previously observed.

Cluster 4: Role of IT in banking

The fourth cluster concentrated on the crucial part information technology (IT) plays in the supply of financial services. According to [ 37 ], several banks have used information technology (IT) to provide consumers with a variety of more effective services. They think that in order to gain clients and boost profits in a cutthroat business environment, bank management must simultaneously use a variety of service channels. The majority of earlier research on IT investment in the banking sector has been on implementing cutting-edge IT-based service channels, including Internet banking, from the perspectives of clients [ 37 ]. From the standpoint of the bank, Barkhordari et al. [ 37 ] demonstrate that IT has a beneficial effect on performance by taking into account both the conventional physical and alternative IT-based service channels at once. They came to the conclusion that the purpose of using IT-related tools in banking is to forward a strategic, transformative objective. Due to the advancement of modern IT, the relationship between banks and their customers has changed substantially over the past few decades. They claimed that some of the examples include well-known innovations such as automated teller machines (ATMs), online banking (e-banking), and straight-through processing (STP), as well as others that have not (yet) gained widespread adoption, such as electronic cash (e-cash), or electronic bill presentment and payment (EBPP). At least the first has changed how people and businesses manage their finances and had an impact on the entire sector. They outlined how the aforementioned advances needed structures that took trends into account and might broaden the scope of current bank architectures to include horizontal and vertical integration dimensions. According to [ 38 ], enterprise architecture is typically represented by the following layers and design objects:

Product/services, market segments, corporate strategy goals, strategic plans/projects and interactions with customers and suppliers are all included in the strategic layer.

Organizational layer: Information flows, organizational units, roles/responsibilities, sales channels and business processes.

Applications, application domains, business services, IS functionalities, information objects, and interfaces make up the integration layer.

Software layer: programs, data structures, etc.

Hardware components, network components, and software platforms make up the IT infrastructure layer.

When it comes to transformations, architectures are really useful, because they integrate many layers. Creating new businesses or reorganizing old ones is transformation.

According to [ 32 ], organizations that are successful over the long term have basic principles and purposes that never change while continuously adapting their business strategies and operations to the external environment. IT's penetration of the banking industry falls under this category of business change. Liu et al. [ 22 ] contributed to the conversation by asserting that technological advancements like high-frequency trading systems (HFT) and algorithmic trading systems had altered the financial markets. The point is that information technology (IT) makes it possible to design complex products, improve market infrastructure, apply adequate risk management strategies and aid financial intermediaries in reaching geographically remote and diverse markets. The Internet has considerably impacted the delivery methods used by banks. The Internet has become an essential medium for distributing banking services and goods.

Cluster 5: Response to DBT

This fifth and final cluster considered the attitude of staff and clients toward DBT. If computer systems are not utilized, they cannot increase organizational performance. Unfortunately, managers' and professionals' opposition to end-user technology is a common issue. We need to comprehend why people accept or reject computers in order to better forecast, explain and promote user acceptance. The findings point to the potential for straightforward yet effective models of user acceptance factors, with practical utility for assessing systems and directing managerial actions aimed at addressing the issue of underutilized computer technology. Agarwal and Prasad [ 39 ] assert that a recent lack of user adoption of information technology breakthroughs is to blame for the frequently paradoxical link between investments in information technology and increases in productivity. They continued by saying that the academic and professional sectors had grown concerned about this paradoxical connection between spending on information technology and increases in productivity. The axiom that systems that are not used generate little value is an often proposed explanation for this relationship. Therefore, in order to achieve the expected productivity advantage, it is not enough to simply have the technology available; it must also be accepted and used effectively by its target user group [ 39 ]. The work of DeLone and McLean threw more light on technology acceptance. When [ 32 ] created a thorough taxonomy, they provided a more comprehensive picture of the concept of information system success. Six main characteristics or categories of the success of information systems are proposed by this taxonomy: system quality, information quality, utilization, user satisfaction, individual impact and organizational impact. Meanwhile, further discussions in this cluster have given more insights into customer acceptance or otherwise of IT in banking. Perceived utility, perceived ease of use, trust and perceived enjoyment are discovered to be immediate direct drivers of customers' views toward utilizing Internet banking, according to [ 40 , 41 ] research. This finding is consistent with some of the findings of other studies. The clients' behavioral intentions to utilize Internet banking are determined by attitude, perceived risk, fun, and confidence. Although the perceived website design has a direct impact only on perceived usability, its indirect effects on perceived usefulness, attitude and behavioral intentions are considerable. Perceived enjoyment only has a short-term impact on perceived ease of use, but both a direct and indirect influence on perceived usefulness. Customer experience is at the heart of the digital banking transition. Therefore, banks must continuously innovate products, integrate cutting-edge technology and add value for their clients.

Keywords analysis

The trends in the keywords displayed in multiple studies can be used to determine the main study direction for upcoming investigations [ 42 ]. The VOSviewer r software, which has previously been utilized by other writers, is employed in this study to extract the author's keywords [ 12 , 21 , 43 ]. A co-occurrences network is produced by the VOS viewer program as a dimensional map [ 12 ]. We used bibliographical author keyword analysis to examine our sample and determine whether there was any increasing or declining themes of interest per research question four. We discovered that writers of the 268 publications in our sample employed 829 keywords to indicate their scientific work, meeting the studies' threshold. Only 26 words, or around 3% of the total, were used at least four times. Our findings imply that the literature on DBT is incredibly heterogeneous. Indeed, according to the results of most recent articles, 80 percent of the authors' specified keywords were utilized precisely once. However, there are several keywords that authors frequently utilize to describe their works (Fig.  6 ). FinTech is the most often used keyword, with 25 occurrences and 29 links to other keywords, followed by digitalization, with 18 and 20 links. Reporting on Digital Transformation contains 13 instances and 18 links. The bibliometric map of author keywords is shown in Fig.  6 .

Bibliometric map of author keywords co-occurrence with five minimum occurrences and overlay visualization mode

The theme areas contemporary academics focus on can be seen by closely examining the map. The use of bibliographic coupling is based on the subject the authors are investigating. The digital transformation of financial service delivery was investigated by [ 43 ] from the perspective of Nigeria about chatbot adoption. A moderated mediated model was used by [ 44 ] to examine how blockchain technology was adopted in the financial sector during the fourth industrial revolution. Additionally, Karjaluoto et al. [ 19 ] looked at how users' perceptions of value influence their use of mobile financial services apps. Similarly, Podsakoff et al. [ 16 ] focused on enhancing the value co-creation process: artificial intelligence and mobile banking service platforms. Taking the discussion to a different dimension, Teng and Khong [ 45 ] worked on Examining actual consumer usage of E-wallets: A case study of big data analytics. David-West et al. [ 46 ] examined sustainable business models to create mobile financial services in Nigeria. Yip and Bocken [ 23 ] deepened the discussion and, in turn, looked at Sustainable business model archetypes for the banking industry. Finally, Niemand et al. [ 20 ] highlighted digitalization in the financial sector: a backup plan with a strategic focus on digitalization and an entrepreneurial attitude. Future research on financial services provided via e-wallets and mobile banking is the main emphasis of the second cluster. Authors are still studying entrepreneurship and digitalization in the supply of financial services. Future research is required in these areas of study because blockchain technology and digital currency are also gaining traction in the literature. The most popular search terms and the number of times they were used are displayed in Table 6 .

Discussions and future research agenda

The first paper on DBT was published by [ 3 ], and since then, both its audience and popularity have grown. Yet, the rapid rise in total publications across a wide range of specialist areas, notably during the last five years, has made it increasingly difficult for academics to ascertain the intellectual structure of the field. Existing qualitative assessments, which usually only address a small fraction of Digital Transformation in Banking while failing to accurately capture the entire body of work, have in some ways made the problem of theoretical specificity worse. It is rather tricky for a qualitative evaluation to describe more than 260 works over three decades. Thus, our research fills a critical vacuum in the literature by thoroughly (and quantitatively) mapping the digital banking domain, documenting its conceptual structure and suggesting its most likely future orientations. The theoretical underpinnings from which they have been developed, the subtopics and subthemes they have written about, and the notable historical contributors to DBT study (such as scholars, schools, and journals) are all identified in our work over time. Overall, our findings imply a considerable worldwide impact of digitization on banking, making it a truly global study paradigm. Additionally, the high number of citations for recent works shows that there is a great need for more research utilizing the DBT theoretical framework, suggesting that the field of study will continue to advance for a very long period. The study's structure is based on a wide range of goals and inquiries.

The initial research question aimed to characterize the increase in publication (document by year and county) and productivity of journals in terms of citations, top authors and institutions of studies on DBT. According to the data that are currently available, 174 papers, or 72% of all scientific publications, were published in the last six years, from 2016 to 2022. Also, prestigious journals carried out more than 40% of the publications. Therefore, our data imply that the quantity and quality of published research have typically stayed up. Our data also show that the research on the DBT is genuinely global in scope, as seen by the contributions of authors from 65 different countries. China and the UK are split equally, with India coming in second. It is essential to add that the BRIC (Brazil, Russia, India and China) countries perform well with publications. African countries like Ghana and Nigeria are equally showing promising signs of publications in this light. Regarding journal productivity, the study has revealed that articles on the banking industry's digital transformation are published in high-caliber journals in the A and A* classes. In our statistics, three top-five journals fall into the A category. These are the International Journal of Information Management (A*), Journal of Information Technology (A*), and Journal of Cleaner Production (A). We found 598 distinct writers from 224 organizations publishing on the subject of DBT inside our dataset. The descriptive statistics also reveal that Ranti et al. (2020) have the most citations, while the Financial University of the Government of the Russian Federation is the most productive institution in terms of the DBT, with seven publications.

The second research topic analyzes the co-authorship analysis and citation analysis by nation of authorship. Figure  3 shows that the UK has the maximum amount of collaboration, with 16 links and 18 co-authorships. China, Hong Kong and the Netherlands tie for second place with six linkages each. The increase in foreign students seeking second and third degrees in the UK and China may be one factor fostering closer ties between the two countries [ 21 ]. The UK and China are two other critical technological superpowers establishing the foundation for digitization. This might have attracted scholars and prompted them to conduct studies in the area. Future research might study the effects of digitization on banking on enforcing public and private sector regulations in emerging nations like Africa.

The third research question assesses the intellectual structure of the knowledge of DBT. This result was attained through citation analysis. Finding the most important publications in a specific field of study through citation analysis involves looking at the relationships between publications [ 5 ]. The primary point of contact for enabling retail banking and consumer transactions in the past has been actual bank branches. Customers are still transitioning from in-person to digital transactions as technology develops thanks to a complimentary effect brought on by increased access to digital banking services as well as an improved user experience of new digital access products, services and an improved user interface. Further research revealed that the banking sector's transition to digitization had increased competitiveness among service providers. The citation analysis highlighted the impact of FinTech on financial services innovations. According to [ 8 ], FinTech ushers in a new paradigm where information technology drives innovation in the financial sector. FinTech is hailed as a paradigm-shifting, disruptive innovation that has the power to upend established financial markets. We discovered that the corporate world is rapidly digitizing, removing industry barriers, opening up new opportunities, and dismantling long-established business structures. The concept of a business model and, to a greater extent, the new banking business model was also included in the analysis. The authors proposed that businesses build the capacity to innovate their business models since it makes good business sense. For instance, it has been seen that social media is significantly influencing the business models of some digitally focused banks. Social media, according to some, has the power to radically alter customer–bank interactions and improve how the two sides communicate in the future. If banks are to have an impact, they must transition from relying on a single, vertically integrated business model to multiple non-linear models and roles in the value chain. As a result of these developments and transformations, financial services will continue to operate in novel and unique ways from those previously observed. The study has proven beneficial for the use of IT in banking. IT-related tools are used in banking to advance a strategic transformational goal. The connection between banks and their customers has altered significantly over the past few decades with the development of contemporary IT. The most prevalent enterprise architecture layers and design items, according to [ 38 ], are the strategic, organizational, integration, software and IT infrastructure. It has been established that information technology (IT) enables the development of complicated products, enhances market infrastructure, implements efficient risk management techniques and enables financial intermediaries to access diverse and geographically dispersed markets. Despite the enormous advantages of digital banking, opinions on the systems are widely divided. Agarwal and Prasad [ 39 ] claim that a recent lack of user acceptance of information technology breakthroughs is to blame for the frequently paradoxical link between investments in information technology and productivity increases. They said that the counterintuitive connection between productivity increases and information technology investments had alarmed academic and professional groups. According to theories advanced by academics, digital technology, in general, and information systems, in particular, must fall under one of the following taxonomies to be accepted and used: system effectiveness, accuracy of the data, usability, user happiness, personal effect and organizational effect. The fourth research question looked at the future directions and emerging research themes and trends in studies of the digital banking transition. Future scholars are still interested in business models, FinTech, and DBT or banking. Additionally, the focus of the conversation is rapidly shifting to emerging and developing economies. Nevertheless, contemporary research areas include blockchain [ 44 ], mobile financial services apps [ 19 ], artificial intelligence and mobile banking service platforms [ 47 ], and sustainable business models [ 46 ]. The importance of highlighting the need for additional research in these fields of study cannot be overstated, given the growing popularity of blockchain technology and digital currency in literature.

Implications for theory

At least four substantial contributions to the body of DBT research, in our opinion, have been made by this study. We contribute primarily by expanding on current DBT reviews. While other reviewers have used qualitative methodologies, we may supplement and expand on such assessments by utilizing a thorough bibliometric study, allowing us to be more explicit about DBT's intellectual progress and structure. This is significant because it gives us a unique opportunity to highlight notable contributors and pinpoint the present and past origins of DBT research. Second, our quantitative analysis of bibliographic data demonstrates how DBT research has developed into its paradigm, which is supported by the original article by Bürk and Pfitzmann [ 3 ]. Third, we make a contribution by detecting rising and negative trends in subtopic areas, so identifying the subjects that are most likely to be studied in the future by academics. Fourth, by conducting a comprehensive assessment of DBT, we pinpoint areas where theory and practice diverge and evaluate the ways in which researchers have aided practitioners by modernizing DBT to comprehend and foresee the difficulties of "real-world" business.

Implications for practice

The banking sector, like other sectors, aspires to embrace contemporary practices and incorporate digital technologies into its operational procedures. This complicated collection of measures necessitates a methodical and considered approach, particularly in financial services where substantial sums of money and severe risks are at stake. DBT in this sense refers to several adjustments made to the banking sector to integrate different FinTech technologies to automate, optimize, and digitize procedures and improve data security. The processes and technologies employed in the financial industry will alter due to several small and significant changes implied by this process. The fundamental tendency of digital transformation, regardless of industry, is the integration of computer technologies, and Statista's analysis indicates that this trend will continue to expand. The challenges posed by introducing new digital innovations must be understood by stakeholders, who must also articulate solutions. Again, embracing digital technologies will involve taking on several tremendous risks; for this reason, bank executives must simultaneously establish and implement a strategy for managing those risks. If regulators utilizing technology to oversee and control the industry want to ensure solid financial stability in the economy, they must constantly be ahead of innovation risk with appropriate countermeasures. Digital banking involves the collection and processing of vast volumes of customer data. This raises the issue of data protection following regulations and international best practices. The DBT's third useful outcome is that it prompts organizational leaders to consider how their personal biases—which are the products of their histories, characteristics and experiences—might influence opinions and, ultimately, bank performance.

Limitations

We know that no study is faultless, and ours has its setbacks. While we made every effort to minimize problems, we nevertheless expect to offer insightful suggestions for future bibliometric and DBT studies. First, we used the Scopus database, a popular database used in bibliometric research, to gather our bibliometric data [ 48 ]. Even though Scopus contains the most data sources, it does not include all research databases on the transformation of digital banking. Furthermore, because this database has so many uses, using Scopus for data collection could likely lead to mistakes that show up when performing bibliometric analysis. To put it another way, errors might have happened if articles were mislabeled, and it is possible that the database completely missed publications important to our study [ 49 ]. To address this potential issue, we followed the best bibliometric analysis methods. For instance, we thoroughly purged duplicates and other forms of incorrect items from our data. Additionally, this research is restricted to English-language publications, and the subject only includes business, management, finance, economics, FinTech and banking digitalization. The data search will be enhanced, and the search restriction will be reduced using several databases.

This article assesses the intellectual landscape and future potential of the field of DBT research, as well as the influence of that research. The approach for this study is based on descriptive analysis, performance analysis and science mapping analysis, and it employs bibliometric analysis. The set was created based on 268 documents from the Scopus database that span the years 1989 to 2022. We demonstrate that DBT has continued to be a hot topic for academic research approximately three decades after its conception. Our findings also indicate that the UK, USA, Germany and China are the countries that have conducted most of the studies on the DBT. Only China and India are considered emerging economies; everyone else is looking at it from a developed economy perspective. We further categorize the body of research on DBT into five main clusters, including (1) Digital Banking Innovation, (2) FinTech and RegTech in Banking, (3) The New Digital Business Model of Banks and Other Financial Service Providers, (4) The role of IT in banking, (5) Response to DBT. Due to a significant influx of international students, the UK, China and Hong Kong continue to be the most collaborative countries. Additional research reveals that papers rated with A* and A grades frequently publish studies on DBT. Once more, the analysis identifies key theoretical underpinnings, new trends and research directions. FinTech, block chain mobile financial services apps, artificial intelligence, mobile banking service platforms and sustainable business models are currently researched. Given the rising popularity of block chain technology and digital money in the literature, highlighting the need for more research in these areas of study cannot be overstated. This study builds on previous reviews by objectively charting the inception and intellectual growth of the digital banking area and evaluating its future possibilities. In essence, this bibliometric study offers a distinct and original viewpoint on the evolution of DBT by carefully and objectively assessing prior material and concurrently offering a clear road map for future work.

Availability of data and materials

The datasets generated and/or analyzed during the current study are not publicly available but are available from the corresponding author upon request.

Abbreviations

Digital banking transformation

Financial technology

Regulatory technology

Internet of things

Automatic teller machine

Artificial intelligence

Information technology

Information communication technology

Straight through processing

Electronic banking

Electronic cash

Electronic bill presentment and payment

High-frequency trading system

Electronic wallets

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Acknowledgements

The authors would like to graciously thank the Editor-in-Chief and the editorial team, and the two anonymous reviewers for their feedback in developing this paper. The writers also acknowledge Prof. Alfred Owusu, Dean of KsTU's Business School, for his guidance, inspiration and support. We appreciate his inventiveness and how it enabled us to clearly define the goal and possibilities of this effort. The authors also appreciate the helpful advice provided by Dr. Thomas Adomah Worae and Prof. Abdul-Aziz Iddrisu as we worked on the first versions of the manuscript. Finally, we would like to thank Riya Sureka, a research scholar at the Malaviya National Institute of Technology in Jaipur, India, for his advice on how to analyze bibliometric data using the ‘R’ and VOS viewer software.

This research received no external funding.

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All authors contributed significantly to the development of this article; LK generated the title, wrote the introduction, collection and analysis of the data, interpreted the co-citation analysis and put the manuscript together. YC reviewed the existing to conceptualize the study, reviewed the study and expanded the analysis. KM involved data generation from Scopus data base, software running, data analysis and review of the work. All authors read and approved the final manuscript.

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Lambert Kofi Osei holds a masters of business administration (finance option) degree from the Kwame Nkrumah University of Science and Technology. He is currently a PhD finance and banking student of Siberia Federal University, Russia. He is currently a lecturer at the Department of Banking Technology and Finance—Kumasi Technical University—in Ghana. He also holds an associated charted membership with the Chartered Institute of Securities and Investment—UK. Osei is certified expert in microfinance (CEMF) from the Frankfurt School of Finance—Germany. Osei has had considerable level of industry experience, with over 12 years managerial experience in the banking industry in Ghana including been the chief executive officer of Eman Capital. Prior to joining Kumasi Technical University, he was the National Chairman of Ghana Association of Microfinance Companies (GAMC)—an umbrella body of all microfinance companies in Ghana. Despite joining academia recently, Osei has made two publications of his work and a lot more articles are under completion stage to be sent for review. It is the goal of him to be an authority in the field of digital banking to impact businesses and societies.

Yuliya Cherkasova holds Ph.D. in economics and is a associate professor, School of Economics, Finance and Public Administration, Siberian Federal University. She is the chair of Digital Financial Technologies of Sberbank of Russia. Her research interests include banking prudential regulation of banks, digital economy and public finance. As a researcher, she has published more than 70 articles, 10 textbooks on topics, related finance and banking aria.

Kofi Mintah Oware has a Ph.D. in business administration (sustainability finance and management) from Mangalore University, India, and an MBA degree from Aberdeen Business School (Robert Gordon University—UK). He is currently a senior lecturer in the department of banking technology and finance. He is also a chartered accountant with membership from the Institute of Chartered Accountants (ICA), Ghana, and Institute of Cost Executive & Accountants (ICEA)—UK. Before joining academia, he worked in blue-chip companies for 12 years in various capacities, including chief accountant, head of finance and general manager for finance & administration in Ghana and research consultant to Aberdeen Businesswomen network in the UK. Among his key roles during industry experience include representing management in union negotiations and presenting the firm's financial reports in the corporate board meeting. In academia, he has 34 publications in various journal, including two "A" s under ABDC (Meditari Accountancy Research), three "B" s under ABDC (Social Responsibility Journal & Society and Business Review) and one C (South Asian Journal of Business Studies) all with Emerald publications. Also, he has 10 academic papers in various journals under review.

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Osei, L.K., Cherkasova, Y. & Oware, K.M. Unlocking the full potential of digital transformation in banking: a bibliometric review and emerging trend. Futur Bus J 9 , 30 (2023). https://doi.org/10.1186/s43093-023-00207-2

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Building a digital-banking business

The digital revolution in banking has only just begun. Today we are in phase one, where most traditional banks offer their customers high-quality web and mobile sites/apps. An alternate approach is one where digital becomes not merely an additional feature but a fully integrated mobile experience in which customers use their smartphones or tablets to do everything from opening a new account and making payments to resolving credit-card billing disputes, all without ever setting foot in a physical branch.

More and more consumers around the globe are demanding this. Among the people we surveyed in developed Asian markets, more than 80 percent said they would be willing to shift some of their holdings to a bank that offered a compelling digital-only proposition. For consumers in emerging Asian markets, the number was more than 50 percent. Many types of accounts are in play, with respondents indicating potential shifts of 35 to 45 percent of savings-account deposits, 40 to 50 percent of credit-card balances, and 40 to 45 percent of investment balances, such as those held in mutual funds. 1 1. “ Digital Banking in Asia: What do consumers really want? ” (PDF–690KB), March 2015. In the most progressive geographies and customer segments, such as the United Kingdom and Western Europe, there is a potential for 40 percent or more of new deposits to come from digital sales by 2018. 2 2. “ Strategic choices for banks in the digital age ,” January 2015.

Many financial-technology players are already taking advantage of these opportunities, offering simplified banking services at lower costs or with less hassle or paperwork. Some upstarts are providing entirely new services, such as the US start-up Digit, which allows customers to find small amounts of money they can safely set aside as savings. 3 3. “ The fight for the customer: McKinsey global banking annual review 2015 ,” September 2015.

A new model: Digital-only banking businesses

While it’s important for banks to digitize their existing businesses, creating a new digital-only banking business can meet an evolving set of customer expectations quickly and effectively. This is especially true in fast-growing emerging markets where customer needs often go unmet by current offerings. The functionality of digital offerings is limited, and consumers frequently highlight low customer service at branches as a key pain point.

So how should banks think about a digital-only offer?

Because banking is a highly regulated industry and a stronghold of conservative corporate culture, there are tremendous internal complexities that need to be addressed. These include the cannibalization risk to existing businesses and the need to foster a different, more agile culture to enable the incubation and growth of an in-house “start-up.” The good news is that our work shows it is feasible to build a new digital bank at substantially lower capex and lower opex per customer than for traditional banks (Exhibit 1). This is due not only to the absence of physical branches but also to simplified up-front product offerings and more streamlined processes, such as the use of vendor-hosted solutions and selective IT investment, that reduce the need for expensive legacy systems.

Six success factors to build digital-banking businesses

Based on our experience helping more than 20 institutions evaluate, design, and build new digital-banking businesses, we have identified six critical success factors that banks will need to address to ensure a quick and successful launch.

1. Focus on where the real value is

Launching a successful new business requires complete clarity about what its value drivers are. While this might seem like an obvious point, we find it is often overlooked. Instead, there is a temptation to copy or replicate existing models. For instance, mBank, Poland’s first digital bank, has succeeded by offering consumers access to unsecured personal loans and other simple products. It’s a model that works in countries like Poland and the Czech Republic, where credit cards aren’t popular, but may not be successful in some other markets.

Banks also tend to take the view that one solution can work for an entire region. Unfortunately, this approach misses significant value opportunities. A granular, country-by-country analysis of revenue per retail banking customer, for example, reveals significant differences in product opportunities (Exhibit 2). Breaking it down further by different customer segments or sub-segments highlights even starker differences that can inform a business strategy. Some 43 percent of banking customers in Taiwan, for instance, are open to digital-investment options versus just 17 percent in Australia.

Another critical element that varies by country is the state of regulation (for example, the requirements for paper-based documents and forms) and the associated infrastructure (such as the availability of a universal national ID). China, for instance, has become a leading innovator in digital banking in part because of a favorable regulatory environment.

2. Constantly test to refine the customer experience

Launching a successful new digital-banking business requires a marriage of traditional consumer research and a deep, real-time understanding of the behavior and pain points of individual customers. This means a constant and rapid stream of prototypes starting with the Minimum Viable Product (MVP) and subsequent iterations in order to figure out what will make the customer experience superior across all touchpoints. This sort of “real life” testing is critical for identifying what customers actually value as opposed to what they might say they value. It also yields up to 70 percent fewer defects and errors. 4 4. Numetrics industry software database.

One company, for instance, approached the creation of a digital-banking business targeted at emerging-markets millennials with a hypothesis that it would be critical to allow customers to sign in with their social-media accounts. Deeper interviews with customers and many versions of the prototype (100 to 150 screens for structured consumer research and feedback loops) revealed this was not true. On the contrary, urban and educated millennials have significant security and privacy concerns about any link between their finances and social networks. So instead of the social media sign-in, the team embedded visual security cues into the customer-onboarding process.

3. Organize for creativity, flexibility, and speed

Building a business using a constantly iterative approach requires a way of working that banks typically aren’t used to. There are three areas where a different way of operating needs to be nurtured.

• Cross-team collaboration. The core group building the digital bank should have a solid understanding of not just the new technology architecture, but also of the bank’s design and brand and the economics of its business model. This includes full-time members, as well as temporary talent in critical areas, such as compliance. From here, the team can gradually scale up to include more staff from technology departments. Portugal-based digital bank Activobank, for example, started with a management team of six to eight people during the design of the digital business model and then scaled up to more than 30 during implementation (excluding line/operational roles).
• A ‘garage like’ working environment. While an actual garage isn’t necessary, a physical space that provides a nurturing environment for creative thinking and prototyping is. This means open spaces, plenty of whiteboards and worktables where people can congregate and work together, as well as habits that foster innovation, such as so-called sprints. In a sprint, all the individuals involved in the development of a digital bank—developers, IT-security, compliance, risk-assessment, and marketing staff who understand the needs of the customer—get together in one room for several live brainstorming sessions. Instead of the lengthy back and forth that normally happens between departments, this allows for quick and efficient decisions about the technical specifications of the product. This process can truly deliver acceleration to working results. Sprints—from whiteboard to working version of the product—can happen in as little as four weeks. On average, companies see a 27 percent higher development productivity. 5 5. Numetrics industry software database. For example, Orange Bank took approximately eight months from strategy to launch of version 1.0 of its digital offering, prioritizing time to market and limiting changes required to their core banking system. Additionally, they were able to quickly scale up, acquiring up to 800,000 customers in the first eight months of operations. One critical requirement and advantage of this approach for banks is the way it allows compliance and risk-assessment staff to get in the room early and take on the roles of enablers and problem solvers, instead of gatekeepers who are often looped in only after plans are well under way or even completed.

A central ‘control tower’ team. Launching a digital bank is a juggling act, with multiple miniprojects running at the same time, such as a new credit card, decisions about hiring, development of the organizational structure, and the creation of a brand. It is the job of the control-tower team to make sure all these projects are coordinated by moving resources to necessary teams quickly or prioritizing initiatives so that timeline targets can be met. The team must work to identify bottlenecks—such as vendors who don’t respond rapidly enough to requests or IT not having enough storage capacity for data—and then either quickly resolve them or refer the problems upward to the CEO or the board.

The members of this team should be exceptional project managers with experience running large-scale projects, a high comfort level with agile development and sprints, a good working knowledge of the big picture, and a clear understanding of relevant regulatory issues.

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4. create an ecosystem of partnerships.

Successfully launching a new digital-banking business requires quickly acquiring a critical mass of customers. Two industries with large amounts of digital customers who can help the process are e-commerce marketplaces and telecommunications. E-commerce players can be useful partners because they present an opportunity for banks to create lending services for the site’s existing customers, both consumers and small and medium-size merchants. There’s a clear benefit for the e-commerce player, too, since easy access to financing on an e-commerce site is an enticement for working-capital-constrained, rapidly growing small businesses to keep selling on that site. Likewise, if consumers know there is financing available, decisions to buy large-ticket items such as refrigerators or TVs become much easier.

The success of Alibaba’s Ant Financial in China, which serves small businesses and has grown into a $20 billion business in two years, illustrates the value of a bank/e-commerce union. Offering simple ways to get loans, Ant Financial has rapidly become one of the biggest lenders to small businesses in China. Although now owned by Alibaba, it originally started as a partnership with CCB and ICBC in 2007.

5. Build a two-speed IT operating model

To implement the test-and-learn approach and short release cycles that are so critical for launching and operating a competitive digital bank, two different yet integrated IT systems are needed: the traditional, slower, secure and stable, transaction-focused legacy back end and a rapid, flexible, customer-centric front end.

The customer front end should be designed by small, nimble product teams (usually fewer than ten people) using an agile, sprint-based development approach. Software release cycles for these customer-facing elements should be modular and designed for quick deployment, prioritizing a minimum viable solution that will evolve over time.

To reduce the time needed to build the two-pronged system, a combination of customized and out-of-the-box functionalities can be used. One new digital player combined existing functionalities from their front-end provider, such as peer-to-peer payments, with new features that consumers care about but to which they don’t have a lot of access, such as personal-finance modules where they can track their expenses and set savings goals.

To the extent that the existing IT architecture and regulatory framework allow, a variable-cost model should be considered, such as cloud-based system or data-storage solutions. A number of solution providers are expanding into emerging markets to offer competitive alternatives to traditional high-capex investments in data centers. Adopting a cloud-based solution allows a new digital player to scale up its cost structure along with revenues, thus achieving a faster breakeven point. It also adds further flexibility, especially if the architecture is designed with open APIs to enable collaboration with potential financial-technology partners who already operate from a cloud-based environment.

6. Get creative with marketing

Since digital-only banks don’t have the same customer-acquisition opportunities as legacy banks with branch networks, marketing is a major cost, representing 25 to 35 percent of total operating expenses. This is true even for legacy banks that create digital start-ups, since the new entities must clearly differentiate their brand and value proposition from the parent operations’ if they want to be successful. Digital-only banks will likely be targeting a younger, more digitally savvy customer than incumbent banks. AirBank, for instance, which launched in the Czech Republic without the backing of an existing bank, tagged itself as the “first bank you will like” and promised that all customer communications would be jargon-free and all fees clearly outlined in one simple document.

To communicate such distinct selling points cost-effectively, banks must cultivate word-of-mouth recommendations and feedback through social media. This entails going after customers in a much more targeted way than banks are used to, both with an understanding of how to maximize value according to geographic distinctions (focusing on Twitter in Jakarta and WeChat in China, for instance) and specific customer niches (for example, buying ads on Facebook for millennials who play golf).

One particularly creative marketing example is a promotion that China’s successful messaging app Tencent’s WeChat ran during the Chinese New Year holiday in 2014. To promote its WeChat Payment service, which allows peer-to-peer transfer and electronic bill payment, the company launched an app that allows users to send a specific amount of money to a certain number of friends, with the app randomly assigning the money. To redeem and see how much money you were sent, recipients had to sign up for a WeChat account. WeChat’s virtual envelopes went viral because they added an element of suspense to the tradition of giving gifts of money in red envelopes during the New Year. In two days, the company got 200 million of its existing and new users to link their bank cards to their account, a feat that took Alibaba’s Alipay eight years.

Launching a new digital-banking business enables banks to rapidly drive value creation. A combination of leveraging smart technology solutions and incorporating the critical success factors outlined above can help banks do this in an accelerated manner.

Sonia Barquin is a consultant in McKinsey’s Kuala Lumpur office, and Vinayak HV is a principal in the Singapore office.

The authors would like to acknowledge the contributions of Somesh Khanna, a director in the New York office and a global leader of McKinsey Digital.

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The rise of digital banking: a paradigm shift in fintech.

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Founder and CEO of FortySeven Software Professionals , with over a decade of experience advising F500 companies and growth-stage startups.

We live in the era of digitalization. This is a well-known fact, and the banking industry specifically has recently been revolutionized by technology. The advent of digital banks—or neobanks as some refer to them—is changing the financial landscape. With the right approach, a digital bank can be more than just a platform for transactions. It can become a financial ecosystem, offering everything from banking to investment products all in one place.

This goes hand in hand with statistics that promise growth. A recent CB Insights report reveals that investment in fintech, although it saw a decline in Q1 of this year, it was the only sector to see an uptick in quarterly deal volume.

What Sets Apart Digital Banks?

Digital banks are essentially banks that operate without physical branches and are built to provide financial services remotely through digital platforms such as mobile apps and online portals. Of course, it reduces significant costs and therefore gives these banks the opportunity to invest in technologies to improve the business.

Digital banks utilize cloud computing to ensure scalability and reliability, enabling them to manage large volumes of transactions seamlessly. AI and ML can provide personalized banking experiences, fraud detection and predictive analytics. It's no surprise that the global AI in fintech market size was valued at $8.23 billion in 2021 and is projected to reach $61.30 billion by 2031.

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Blockchain offers an unprecedented level of security and transparency in transactions. Digital banks incorporate multiple cybersecurity measures, including end-to-end encryption, multifactor authentication, KYC and more. These measures ensure customers' financial information remains protected, making digital banking as safe as, if not safer than, traditional banking.

The Future Of Fintech Funding—A Closer Look

Despite the investment fluctuations, the future of fintech funding remains bright. The $7.3 billion invested in Q1 2024 across 904 deals, as reported by CB Insights , is no small feat. It's a sign of the capital's continued belief in the promise of fintech and digital banking. U.S.-based fintech companies led the charge for this quarter, securing $3.3 billion across 393 deals, followed by the European fintech sector with $2.2 billion from 203 deals. Asian fintechs ranked third, with $1 billion from 210 deals. Noteworthy transactions include a $430 million funding round for the U.K.'s Monzo, led by Alphabet in March, and significant raises by U.S. firms Bilt Rewards and Kore.ai in January, totaling $200 million and $150 million, respectively.

The Rise Of Digital Banks: A Response To Consumer Preferences

The rise of digital banks is not only a technological endeavor but also a response to shifting consumer preferences. Today's customers expect services that fit within their digital lives. They want to manage their finances the same way they shop, communicate and live: digitally, seamlessly and on-demand.

The success of early disruptors like Revolut only underscores this shift. Most digital banks offer accounts that are easier to open, have lower fees and often come with features that make them more customer-centric, like included insurance or the possibility to make investments easily. In my own practice, we’ve built more than 100 digital banks, payment institutions and neobanks for new players on the market, and the one common thread is the mindset of the entrepreneurs who run these businesses: They are all eager to make people's lives easier.

And we see this with digital banks providing customers with the ability to pay or invest on the go. It’s not only about the preferences of the customers but more about the necessity of the real world. As an entrepreneur and owner of a company that has been part of this fintech transformation since its inception, as we look ahead, our vision for the future of finance is one that is inclusive, innovative and, most importantly, digital.

Investing In Innovation: The Key To Digital Banking Success

The industry is highly competitive, with new players entering the market regularly and established banking institutions quickly pivoting to offer digital solutions. To stay ahead, these banks invest heavily in technology, user experience and security. There are a lot of ways to build your own digital bank, and one of them is the implementation of the concept of "banking as a platform," where digital banks open their APIs to third-party developers, allowing them to create complementary services. This approach fosters a rich ecosystem of financial tools and benefits both the banks and their customers.

Since the implementation of cutting-edge technologies is crucial for the success of digital banks, it underscores the necessity of selecting the right technology partners. It's vital to thoroughly vet potential partners to ensure they meet all technical and business requirements. This includes assessing the scalability of their solutions, transaction capabilities, data storage practices and the costs associated with each service.

Choosing a partner that aligns with your own vision for innovation and customer service is key. Attention must be paid to where information is stored to comply with data protection regulations and understand the financial commitment required for scaling infrastructure to meet growing customer demands. This is a mistake that many startups make. In order to avoid it, check first how scalable the solution is.

This comprehensive approach ensures that digital banks can provide secure, efficient and cost-effective services to their users, paving the way for sustained growth and success in the competitive financial landscape.

Final Thoughts

The digital revolution in banking is not just a trend; it's a significant metamorphosis that is shaping how we manage our money, conduct our business and plan our futures. Digital banks are the architects of a more accessible, personalized and efficient financial world. With the right vision and investment, they can direct the way for a financial future that is dynamic and adaptable.

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PwC’s 2021 Digital Banking Consumer Survey

Now that banking customers are digital, where's your national deposit strategy?

Direct banks’ share of primary banking relationships is up 80% since 2019

of consumers would prefer to open a new account digitally but are unable to do so today

of consumers born since 1996 (Gen Z) say their primary bank is where they hold their main check

Over the past year and a half, many bank customers got a lot more comfortable with digital interactions, and spent less time in branches. What if they never come back?

We’ve been looking into the minds of US financial services consumers since 2012, surveying groups about their banking, borrowing, payment, insurance and investing habits and preferences. We conduct this research to help us understand what retail buyers want, need and do when choosing and interacting with financial institutions. This year, PwC’s 2021 Digital Banking Consumer Survey canvassed 6,000 retail consumers. We found important changes in both how and where these customers do their banking. These shifts hold important implications for financial institutions of all sizes.

Crucially, we believe that few banks can continue to excel on the basis of their pre-COVID geographic footprint alone, and that virtually every bank should now be thinking about implementing a truly national deposits strategy. Fortunately, the market shake-up is also introducing a lot of new opportunities for banks far beyond the large market leaders. If you understand the needs of your target customers and build your value proposition accordingly, they can come.

US consumers are changing how and where they bank

• Digital banking
• Digital account opening
• Direct banks

More consumers banked digitally: 61% interact weekly on digital channels

The pandemic has altered the way in which US consumers tend to interact with their financial institutions, with an overall shift toward digital. While this is the continuation of a trend we’ve been following for years, this shift was dramatic.

There’s now a large and growing customer segment that has no interest in branches at all. These digital natives —consumers who are digitally engaged, with a preference for avoiding branches altogether—now represent 32% of those we surveyed, up sharply from 26% in early 2020. Meanwhile, there was a sizable and offsetting decline in digital adopters: consumers who are primarily digitally engaged but like having the option of using a local branch. This year, many of these consumers dropped the need for the branch security blanket or, to a lesser extent, reverted to using a nearby branch for most of their banking activities.

We’ve identified two types of consumers who like going to branches: those who are “phygital”—active users of both digital and branches—and those who are branch-dependent. As a result of this growing digital comfort and availability, 25% of US consumers now identify as phygital, up from 17% a year ago. This shift neatly mirrors the reduction in branch-dependent users: 35% of the total—compared to 42% pre-pandemic—as more consumers have grown comfortable using web and mobile apps.

The digital gap in account opening: 20-25% forced to use branch but prefer digital

While banks invested heavily in digital over the last year, we still see a gap in meeting customer preference for digital account opening: 20-25% of consumers would prefer to open a new account digitally but are unable to do so today. For example, 21% of those opening a new deposit account (e.g., a savings account or CD) would prefer to do this digitally, but are unable to do so at their current bank.

Branches still have their place for many users: 33% prefer the branch for certain activities. Although they were forced to use digital channels during COVID, two in three customers still find branches to be a meaningful channel to interact with their financial institutions, especially for activities like account management or financial research. And while digital channel use accelerated, there’s still a meaningful customer segment (35%) reporting that they would not use a bank that doesn’t have a nearby branch.

US consumers are also changing where they bank

The pandemic has accelerated the most recent trend of primary bank relationships shifting away from regional and consumer banks to direct banks, which exist entirely online. This suggests even more challenges for traditional financial institutions, showing that consumers are increasingly open to rethinking everything about how they manage their financial lives.

Direct (or digital) banks now make up 20% of all primary bank relationships in the US, up from 10% in 2019. Large traditional banks have continued to hold steady at around 42% of consumer relationships. Those in the middle—regional banks, community banks and credit unions—continue to be squeezed. Customers who prefer their community banks value low fees and customer service, while customers who choose digital banks do so for a diverse product set and as a result of friend/family referrals.

We’re also seeing a generational shift in the definition of a primary bank, with checking accounts becoming less dominant and advice and social support growing in importance:

• While 60% of baby boomers (consumers over 55) assume that their primary bank is where they hold their primary checking account, only 34% of Gen Z consumers (ages 18-24) say the same.
• In contrast, 26% of Gen Zers say their primary bank is the company that they trust to give the best advice, compared to just 7% of baby boomers.
• There’s also a small—but growing—share of consumers who say their primary bank is the one that acts in the best interest for the environment and society, including 14% of Gen Zers and 12% of millennials (ages 25-39). But only 2% of baby boomers feel the same.

Share of account holders who cite a non-bank as their primary financial institution has doubled in the past year

Nontraditional providers of banking services like retailers, social media providers and automakers have been rapidly gaining traction, especially among younger consumers. This may be happening faster than many bankers think: 57% of millennials and 64% of Gen Z consumers now say they have a financial account with a nontraditional institution. In fact, 17% of those with accounts with nontraditional financial institutions now identify this as their primary financial institution, double what we saw just a year ago.

To be sure, traditional financial institutions still hold great weight, but the nontraditional players—sometimes known as neobanks, personal finance companies, fintechs, direct banks and peer-to-peer lenders—seem to have opened the door to others. One in four consumers say they’d use a retail company for banking activities, and they’re increasingly likely to buy bank products from a social media provider or automaker.

Direct banks are no longer a niche play; to a growing number of consumers, they are more relevant than regional or community banks.­ Peter Pollini Banking and Capital Markets Consulting Leader, PwC US

Every bank should be building a specialized national offering

For decades, most banks used geographic proximity as their primary calling card and it worked fine—until it didn’t. Consumers have been finding their way toward alternative banks with little or no physical presence, and the growth in non-financial accounts seems to have come at the expense of both regional and community banks. This shift is even more pronounced by age: Younger consumers are even less impressed by physical branch presence, and they are even more open to alternative providers. We therefore expect banks’ geography to become increasingly less relevant over time.

Some financial firms will use this shift to dig even deeper into their local roots and find ways to make their branch presence meaningful to a profitable segment of customers, but it will be an uphill battle. We believe that, for most banks, the alternative—pursuing a well-defined customer niche with a relevant offering, without regard to geography—is not only a useful defensive strategy but an opportunity to grow.

Leading banks have been seizing the opportunity to package trusted advice and convenience through solutions rather than products. These solutions are:

• Tied to affinity groups, a particular industry or a particular behavior.
• Specific and specialized, and purposefully broader than just financial products and services.
• Offered nationally through marketing that targets well-defined groups of consumers.
• Often delivered through strategic partnerships.

We’re already seeing interesting examples of this at work:

• Zions Bank offers a holistic professional practice financing solution for medical professionals aspiring to start their own practice, expand a medical office, buy new equipment or refinance existing loans. Using an online application, the bank is pursuing dentistry, veterinary, optometry and medical practices.
• Valley Bank has announced a specific solution for cannabis-related business, with a cashless digital payment platform intended to address the needs of this largely unbanked sector. Valley Bank expects to serve dispensaries, cultivators, testing labs, wholesalers, CBD/hemp businesses and armored car services.
• Chime, a fintech provider that aims to support “everyday Americans who aren’t being served well by traditional banks,” offers a secured credit card for those looking to build a credit history. While the product category isn’t new, the marketing emphasis on eliminating fees and interest is.
• Nerve is a neobank targeting independent musicians, linked to a music streaming platform. The company is positioning its offering as building strong communities by providing a private networking feature to help professional musicians find each other, make payments and collaborate.

Making it happen: the capabilities you’ll want to support a national offering

In theory, migrating from a geographic-centric marketing approach to a segment-centric marketing approach shouldn’t be all that different. In practice, we recommend that financial institutions beef up their operations to strengthen some key capabilities, including:

An in-house, dedicated product development team.  It isn’t enough to say that your service offering is meaningful for elementary school teachers or locksmiths. You need to demonstrate to your target audience that you understand their needs and that your solution offers benefits that other banks don’t. You’ll want to have a team that is responsible for designing and iterating on offers, and that has the capability to capitalize on customer needs to introduce relevant products and features.

An active team focused on partnerships and experiences.  Banks have typically been fairly self-contained in their marketing. But as customers gain experience with interconnected ecosystems in other industries, they’ve shown that they’re open to new buying influences. For banks, this offers new ways to reach beyond conventional products and strengthen relationships with customers—but it may also raise new issues around business models, cybersecurity and more. You’ll want to build up a competence around navigating these issues as you define the boundaries of your target market.

A robust customer data platform.  Customer segmentation has gotten a lot more sophisticated in recent years. All customers now expect differentiated experiences, drawing on what they’ve seen from other micro-targeting campaigns. There are tools to make this emerging trend simpler for you, such as PwC’s no-code  Customer Link  product. Customer Link is a customer data solution that unifies your own data with PwC’s extensive third-party data to help you adapt to changing demands. The goal of these tools is to build an integrated view of your customers, often drawing on AI and using machine learning models to enhance precision.

A modern bank architecture.  Legacy bank systems were designed for a very different environment, one where products and channels and volumes were comparatively static. To compete effectively in the national market, you’ll almost certainly need a platform that is API-enabled, allowing you to rapidly adapt to any new opportunities, whether internal and external. Cloud-based systems now make it far easier to develop and test products, scaling up and down resources quickly as demand rises or falls.

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Why now? Because existing banking relationships have become more vulnerable

As our survey shows, customers are rapidly getting more comfortable with digital banking tools, and they aren’t looking back. Historically, banks have counted on the relative stickiness of their relationships and their geographic presence to keep them in business. But if buyers don’t care about those attributes—which is increasingly the case—then a competitor’s targeted digital offering may make it far easier for it to pick off your most valuable customers.

However, the competition is not between you and digital start-ups. You’re now competing with anyone who understands your customers’ needs with more granularity than you do and designs their offerings accordingly. This could be a bank in Maine, Florida, Arizona or Alaska, even if your primary territory is in the center of the country.

There’s still time to adapt, if you’re prepared to rethink geographic limitations and are ready to build on the capabilities and specializations you already have. In fact, we believe that this year’s Digital Banking Consumer Survey points to new organic growth opportunities. In the wake of the pandemic, customers have been settling into new buying patterns with long-term implications. How will you respond?

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Adoption of digital banking channels in an emerging economy: exploring the role of in-branch efforts

• Original Article
• Published: 17 February 2021
• Volume 26 , pages 107–121, ( 2021 )

Cite this article

• Simran Jit Kaur 1 ,
• Liaqat Ali 1 ,
• M. Kabir Hassan 2 &
• Md Al-Emran 3  

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The aim of this qualitative study is to analyse the role of in-branch efforts of banks on migrating customers from branch banking to digital banking in India. In-depth semi-structured interviews were conducted with bank executives representing senior management from public and private sector banks in India. Qualitative content analysis technique was used to analyse the data. Varieties of responses received during interviews were clubbed into four main themes based on data reduction, display, and conclusion-drawing processes. In-branch communication with customers, digital transformation of the branch, customer-centric initiatives, and redefined role of branch staff hold the potential to bridge the customers’ migration to digital banking. The paper suggests that the key identified factor in improving digital banking acceptance in India is the requirement of integrated cultural and organisational changes at the bank’s level to gain the customers’ confidence and trust in digital banking.

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Introduction

In the last few decades, huge investments have been made by banks in technology to reduce their cost and improve customer’s experience. Banks are offering digital banking channels such as ATM, Internet banking, mobile banking, digital banking kiosks to deliver best quality services to customers with the expectation of increasing profitability and reducing operating cost (Sarel and Marmorstein 2003 ). It is observed that the bank’s costs reduce with the shift of a major chunk of customers to modern banking channels (Howcroft et al. 2002 ). However, the expected reduction in operating expenses has not been achieved yet by the banks as they are still struggling to move customers towards digital banking channels (Sarel and Marmorstein 2002 ; DeYoung et al. 2007 ; He et al. 2019 ). The situation is much critical for emerging countries such as India where only 16% of the rural population use the Internet for making digital payments (Pandey 2018 ).

According to the report released by Gartner, IT expenditure by securities and banking firms in India has reached $9.1 billion with a growth of 11.7% (Shetty 2017 ). Further, the total IT expenditure is expected to reach $11 billion in 2020 (Gartner 2019 ). However, the return on investment of Indian banks in technology is just 12% of US banks due to the low rate of digital banking acceptance (Sinha and Mukherjee 2016 ). At the same time, it is worth mentioning that the cash transactions cost is 1.7% of Indian GDP which puts a huge burden on the economy (Bakshi 2016 ). In this regard, the Government of India initiated the ‘Digital India’ campaign in 2015 to empower people digitally. The success of the ‘Digital India’ campaign is apparent from the fact that more than a billion Indian citizens have a digital identity with 560 million Internet connections (Kumar 2019 ). The purpose of digitisation is to bring disconnected rural remote regions into the formal financial sector through electronic banking channels which in turn will contribute to economic development. Digital banking mediums help to connect the underserved masses with mainstream banking system by offering various innovative banking services. The modern mobile banking apps also enable customers to use non-financial services. However, due to the lack of awareness and knowledge, these services have not been fully utilised by customers (Shaikh et al. 2020 ). Certainly, there is a dire need to positively influence customers about the usability of modern banking channels and persuade them to migrate to digital channels (Figs.  1 and 2 ).

Research framework (adapted from Davis 1989 ; Lee et al. 2007 ; Yap et al. 2010 )

Key in-branch efforts and associated challenges

Banks in India need to understand that making huge investments in technology is not enough unless most bank customers adopt it for banking transactions. As rightly argued by Shaikh and Karjaluoto ( 2016 ) that digital banking is much more than an innovative banking channel and a convincing marketing strategy. The term digitisation has brought a significant change in how banks understand and satisfy its customers’ needs. In India, efforts have been made by the banks to persuade customers to adopt digital banking channels such as intensive digital marketing campaigns to educate customers about modern channels, but still, the adoption rate is not as expected (Patel and Patel 2018 ). Since bank branches provide an opportunity to the bank to communicate and persuade customers personally by demonstrating the proposed benefits of adopting modern banking channels, the present study exhibits the need for Indian banks to focus upon implementing serious in-branch effort. It is the high time for banks to identify cost-effective in-branch strategies to connect the masses with digital banking channels, though this area is under-researched. In this regard, the present study attempts to evaluate the bank executives’ perceptions regarding the effectiveness of in-branch efforts of banks to persuade the customers to adopt and use digital banking channels.

The earlier studies conducted in the area of digital banking have mainly explored the attitude of customers and antecedent variables that matter to customers while using digital banking channels or the factors impacting the intention of customers’ to use the modern banking channels (Montazemi and Qahri-Saremi 2015 ; Szopiński 2016 ; Alalwan et al. 2017 ; He et al. 2019 ). But surprisingly, rarely a study in India has given attention to study the impact of the bank’s initiatives within the branch to encourage customers to adopt modern banking channels.

The present study tries to close this research gap by answering the following research question:

RQ: How In-branch experience and technological initiatives can contribute to the adoption of digital banking channels by customers.

To answer this research questions, we draw on TAM (technology acceptance model) to analyse how in-branch efforts of banks can contribute to enhancing customers’ perceived usefulness (PU) and ease of use (PEOU) which positively influences customers’ attitude towards technology acceptance. Also, the analysis is guided by additional antecedents’ variables identified by extended TAM proposed by various researchers and scholars in the context of adopting self-service banking technology.

The empirical data for the qualitative study are based on in-depth interviews conducted with 22 bank executives from public and private sector banks in northern urban India. The recent report by Vater et al. ( 2019 ) strongly highlights the struggle for banks at present to migrate customers to digital channels. Due to huge investments involved in the digital banking platform, ensuring the adoption and usage of these channels is an important goal of the banks. The study elucidates the need to transform future bank branches by identifying cost-effective strategies and segmenting the branch customers on the basis of their banking needs and preferences. The present study contributes to the literature by studying how personalisation and in-branch initiatives should be strengthened by the bank managers to build customers’ initial trust in digital banking channels. The study also contributes to identifying various integrated cultural and organisational obstacles particularly in public sector bank branches which hinder the customers’ adoption of digital banking. The study begins with a review of the literature on customer technology acceptance for banking transactions. In the later section, we describe the conceptual framework for analysing interview data based on TAM (Davis 1989 ) and its extensions propounded in context of adopting self-service banking technology, followed by research methodology section. The following section describes the findings in terms of identified themes and concludes with the discussion of findings.

Status of digital banking adoption in India

Technology has transformed the banking industry all over the world. However, the adoption rate of technology-enabled banking services varies across different countries (Takieddine and Sun 2015 ). In India, almost all banks offer digital banking services to their customers as a strategic tool to survive in the market (Safeena et al. 2014 ). With the growth of investment in technology by financial service providers in India, it becomes highly important to understand the perceptions of customers and designing the strategies accordingly (Roy et al. 2017 ).

Post demonetisation (invalidation of large currency notes) Government of India has launched various efforts to migrate customers to digital payment channels from cash (e.g. e-Wallets, Unified Payment Interface, Aadhaar-enabled payment system, etc.). As per the report of Reserve Bank of India (RBI) on digital transactions, the total volume of non-cash transaction in India has reached 1.9 billion in 2016–2017 from 228.9 million in 2004–2005. Despite this rapid growth, the largest public sector bank (SBI) in India has reported only 5.86% mobile banking users and 9.69% of Internet banking users in its recent annual report 2016–17. Thus, only informing or spreading awareness would not shift customers towards digital banking but requires changes in the implementation process and successful implementation depends upon how well these technological advancements are communicated to customers (Sarel and Marmorstein 2002 ).

The point of utmost importance is that in India the challenge is not just migrating customers from traditional banking channels to digital channels but also to connect the unbanked masses with the mainstream banking system using digital finance. Undoubtedly, digital mediums have increased the level of financial inclusion globally from 51% in 2011 to 69% in 2017 (Global Findex Database 2017 ). But the fact which differentiates the developing and emerging economies from developed economies is the adoption and use of digital banking channels from the consumer end. Apparently, in high-income economies, 91% of adults use digital payment method, while in developing economies just 44% of adults make digital payment through their account (Global Findex Database 2017 ).

India is an emerging economy wherewith the launch of digitisation campaign (2015) and implementation of demonetisation (2016) the significant chunk of the population is shifted quickly from traditional banking channels to digital channels. However, education, lack of infrastructure and strong Internet connectivity are the issues which hinder the adoption of digital banking channel in India (Tiwari 2019 ). As per statistics, 80% of Indians have a bank account (The Economic Times 2018a , b ). However, World Bank reported ( 2017 ) that 48% of the total 310 million accounts opened in India from 2014 to 2017 are inactive. The lower than anticipated regular usage of digital mediums for banking transactions calls for more in-depth and critical research on formulating the strategies and practices to migrate customers to technology-enabled banking channels based on the factors that matter to customers the most.

Conceptualisation of in-branch efforts and technology acceptance

The literature on digital banking is replete with examining the customers’ attitude (Pikkarainen et al. 2004 ; Eriksson et al. 2005 ; Ibrahim et al. 2006 ; Walker and Johnson, 2006 ; Poon 2007 ; Alalwan et al. 2016 ; Sánchez-Torres 2018 ) and factors affecting the acceptance of digital banking services (Montazemi and Qahri-Saremi 2015 ; Szopiński 2016 ; Alalwan et al. 2017 ). Few studies have also explored the impact of technology on the bank-customer relationship (Harden 2002 ; Durkin and Howcroft 2003 ). Further, Karjaluoto et al. ( 2018 ) highlighted the impact of investment in mobile financial services apps (MFSAs) on improved bank-customer relationships. Even in India vast number of studies have been conducted on customers’ behavioural factors (Malhotra and Singh 2010 ; Singh and Kaur 2011 ; Sinha and Mukherjee 2016 ) with regard to technology acceptance in the banking industry. However, very scanty literature is available on understanding the significance of in-branch efforts of banks to migrate customers to adopt digital banking channels. Impact of in-branch communication with the customers about technology-driven efforts has received hardly any attention of scholars in India.

In reference to the present study, the in-branch efforts are “the services provided at branch level to make customers comfortable with digital channels by imparting first-hand knowledge of technology-enabled banking services”. Sarel and Marmorstein ( 2002 ) were among the pioneering researchers who highlighted the role of communication at branch level to migrate customers to digital banking channels. They opined that effective communication with customers at the branch for persuading them to use digital banking channels can make a difference in their perception and attitude. It is worth mentioning that Former RBI governor Raghuram Rajan ( 2015 ) had also emphasised the significance of communicating the banking products and services to customers in regional language to connect the bank with its customers:

It is the responsibility of the government and the banking sector to provide banking facilities to those who have money but have no access to formal banking channels in a language that they would understand. We should also arrange for financial literacy in the language that they understand.

Previous studies have already reported high bank branch footfall in Indian banks. A survey report by Schofield and Chew ( 2013 ) on future of bank branch in Asian banks established that an average bank customer in India makes 28 branch visits in a year which is very high as compared to developed countries like Australia, UK and the USA. Similarly, Avaya ( 2017 ) surveyed 5000 banking customers from UK, Australia, UAE and India. The survey reports that 51% of Indian bank customers still prefer to visit their branch regularly which is highest among the four countries surveyed.

Further, Marous ( 2013 ) identified that encouraging customers to change the current banking channel is a difficult venture. Similarly, Karjaluoto et al. ( 2019 ) asserted that customers’ intention to use contactless payment systems is highly influenced by habit and it is hard to change such behaviours. The best alternative at this stage that the bank could have is to set up an optimal channel mix to meet customers banking needs. Banks can educate their customers about online banking channels in the branch or online using interactive kiosks and tablets. Incentives for using online banking channel can persuade the customers to use these channels in the future (Accola 1996 ). Further, Brunier et al. ( 2015 ) opined that banks can reduce their cost and improve technology adoption rate by educating customers using in-branch interactive screens and branch employees can make customers familiar with technology-enabled banking services during their visit in the branch. They further reported that in the era of technology the significance of bank branch cannot be overlooked since customers still prefer branch network for taking highly specialised advisory services to buy high-value and complex products such as investment and mortgage.

In a recent study, Yu and Hughes ( 2016 ) highlighted the significance of in-branch ATMs and kiosks to successfully migrate customers to digital channels. The authors revealed that banks need to identify the customer segments as per their banking needs and channel preference to create a unique channel mix. Similarly, the cognizant survey (2016) reported that bank branches can serve as the best platform to interact with the customers and influence them positively. The best customer experience at branch travels across other banking channels. Dallerup et al. ( 2018 ) defined various formats of smart branches in a digital era based on location. Four categories of bank branches such as Box branch, Standard branch, Segment branch and Flagship branch are suitable for areas with specific attributes. At the same time, branch employees need to be trained to perform multiple analytical tasks to improve bank performance.

Schofield and Chew ( 2013 ) revealed that most of the branch visits in Asian countries involve routine banking transaction which increases the cost and can easily be performed online. Thus, the biggest challenge for the banks is to divert the customers from branch banking to digital banking in an interactive way. The fact that in the era of the technology bank branches will continue to serve customers’ high-value and complex banking needs is well established in the literature (Luchetti 2017 ; Joyce 2017 ). Since the strong human relationship is the base of business in most of the Asian cultures (Rotchanakitumnuai and Speece 2003 ), the study attempts to concentrate on efforts to improve the online banking acceptance by maintaining the human touch. The study was initiated to highlight the need for banks to recognise the potential of in-branch initiatives to persuade customers to use technology-enabled banking channels and how banks can improve its online banking customer base by convincing its existing branch visiting customers about the usefulness of digital banking channels. There is no doubt that digital channels hold the potential to improve customer experience and banks have already invested hugely in technology.

The acceptance rate of digital banking channels in India is much lesser than anticipated (Patel and Patel 2018 ). The question is why banks are still struggling to move customers to digital banking channels even after making a huge investment in technology. Even in the USA, 38% of customers reported preferring bank branches or ATMs to other digital banking channels in a recent survey conducted by McKinsey Consumer Insight ( 2016 ). The matter of fact is that the company cannot always allow its customers to follow their preferences as this leads to an increase in the cost (Myers et al. 2004 ). This scenario brings light to focus on directing the customers to adopt the right channel mix for products and services. The first thing that banks can start with is transforming or modernising the bank branches to satisfy the needs of customers (Cognizant 20–20 Insights 2016 ). More specifically in India where the acceptance rate is already so low and digital banking is in its nascent stage.

TAM and digital banking adoption

In order to analyse the impact of in-branch efforts on the adoption of digital banking in India, the study draws upon the technology acceptance model (TAM) (Davis 1989 ). This is the highly accepted model to study the users’ attitude to technology by analysing perceived usefulness (PU) and perceived ease of use (PEOU), the two main determinants of users’ behaviour towards technology. Here, perceived usefulness (PU) is the degree to which the potential customer believes the new technology to improve his/her performance and perceived ease of use (PEOU) is concerned with prospective customers’ perception that new technology will reduce the efforts required (Davis 1989 ). TAM has been very well accepted and validated in a number of studies worldwide in the context of technology adoption (Taylor and Todd 1995 ; Wang et al. 2003 ; Pikkarainen et al. 2004 ; King and He 2006 ). Therefore, TAM provides a valid approach for our study to understand the adoption of digital banking in the Indian context. Also, the analysis is guided by additional antecedents’ variables identified by extended TAM proposed by various researchers and scholars in the context of adopting self-service banking technology.

Our review of related studies from developing countries mainly demonstrates the extension of technology acceptance model (TAM) (Davis 1989 ) based on cultural attributes and individual characteristics of consumers, as it has been believed by various researchers that basic TAM ignores the impact of external influences such as cultural and infrastructure availability on adoption pattern. For instance, evidence from the Middle East as provided by Sukkar and Hassan ( 2005 ) highlights the need to include cultural factors from the consumer side and technical quality from bank side to the existing TAM in order to make it more relevant in the context of developing countries. In the same line, Tobbin ( 2012 ) identified two additional variables such as economic factor and trust apart from TAM variables that matter to unbanked customers in Ghana while adopting mobile banking services.

Evidence from India brings light on the impact of computer self-efficacy, i.e. the ability to use computers, quality of Internet connection, Internet banking awareness and social influence apart from basic TAM variables on customers’ adoption of Internet banking (Sharma and Govindaluri 2014 ). In another study conducted by Nath et al. ( 2013 ) from the perspective of bank employees, three additional factors, namely computer self-efficacy, social influence, technological facility in terms of infrastructure, were reported as an extension to TAM variables in the Indian context. Banu et al. ( 2019 ) identified ease of use and self-efficacy as major drivers of technology adoption in India. Researchers reported a direct link between trust, offline service quality and adoption of technology (Patricio et al. 2003 ; Lee et al. 2007 ; Bashir and Madhavaiah 2015 ). Lack of required infrastructure and connectivity and trust has been reported as the major inhibitor for technology adoption in India (Nath et al. 2013 ; Sinha and Mukherjee 2016 ). In previous studies, traditional service quality in the bank has been viewed as an enabler to build customers’ trust in e-banking services which in turn influences customers’ adoption of e-banking. For example, Yap et al. ( 2010 ) were the pioneer researchers who explored the impact of offline service quality provided in the branch on the adoption of digital banking channels. Later on, Chiou and Shen ( 2012 ) highlighted the significance of offline environment on Internet banking acceptance.

Following the same thought, we proposed research framework for our study to analyse the bank executive’s perceptions of how in-branch efforts of banks in India can influence the adoption of digital banking based on some key identified factors from the literature to make it more relevant in the Indian context. Table  1 provides an overview of the predictors of technology adoption. In order to shift customers towards digital banking channels, we identify some most significant factors for the adoption of technology by customers in India. These factors were further used for coding the interview responses and identifying relevant themes for analysis purpose.

Data methodology

The current study attempts to qualitatively analyse the perceptions of the bank executives from public and private sector banks in India, working at branch level and well-versed with the bank’s operational and marketing strategies. Face-to-face interviews were conducted to collect the responses from the respondents between October 2017 and February 2018. The purpose is to get deeper insights into what bank executives perceive, experience and believe regarding the effectiveness of in-branch efforts on consumers’ attitude to adopt technology-enabled banking channels.

There are two reasons for selecting the qualitative approach: the dearth of empirical research (Hirschman 1986 ) in India on exploring the potential of in-branch efforts to promote digital banking channels and the flexibility which qualitative approach extends to deeply investigate complex relationships (Healy and Perry 2000 ).

Sample selection

Bank executives were selected from the public sector (State Bank of India, Punjab National Bank) as well as the private sector (Axis and HDFC). Bank executives have been selected as respondents as they possess a better understanding of ground reality due to extensive experience of the banking industry. Geographically, the study concentrates on two states from the Northern part of India where information technology (IT) hubs of north India are situated. As in most of the qualitative studies, purposive sampling technique was used to select the respondents from various banks. In total, 35 bank executives representing senior management from public and private banks were approached, but 13 bankers refused to participate in the study. Sample organisations (Banks) selected for the study represent the top banks in India in terms of market share and IT investment.

Data collection and analysis

In total 22 face-to-face interviews were conducted, out of which 12 were with public sector managers and 10 with private sector bank managers. The high response rate (62%) indicates the willingness of bankers to share their experiences and perceptions on the topic. One interviewee from public sector bank had previous work experience with a private sector bank. This helped to attain the unique set of perspectives regarding differences among in-branch practices of public and private sector banks in India. Most of the interviews lasted for an average of 25–30 min. Interviews were conducted in the English language. Most of the bank managers were not comfortable with the tape recording of the interview, so detailed notes were prepared to record the responses of the managers. During the fieldwork, it was observed that most of the bank branches were quite busy and the staff was fully occupied specifically in case of the public sector banks. Due to heavy rush and long queues in most of the bank branches, it was hard to take the time of bank managers for interview. However, with repeated visits and strong potential of the subject matter for improving banking experience, we managed to get insights of bank managers on the topic.

During interview sessions with bank executives basically, three areas were covered

Their perception regarding technological interventions in the banking industry and how technology has changed working experience in the bank;

In-branch efforts undertaken by the bank for persuading customers to use innovative digital banking channels if any;

Can these efforts bring a positive change in customers’ attitude and perception towards technology-enabled banking channels and how?

The interviews were semi-structured in nature, and various other related questions were asked loosely to allow flexibility and get maximum insights. Appendix Table  3 gives an outline of the semi-structured interview.

Qualitative content analysis technique (Mayring 2000 ) was used for the analysis of interview data. Extensive notes were prepared during interview sessions. Varieties of responses received during interviews were clubbed into four main themes using NVIVO 9 software, based on data reduction, display and conclusion-drawing processes (Miles and Huberman 1984 ).

For the analysis purpose, both inductive and deductive technique was used for identifying themes. Firstly, using the deductive technique the TAM aspects were explored based on the research question and theoretical concepts (Davis 1989 ; Lee et al. 2007 ; Yap et al. 2010 ) and then the codes were identified. Following the coding process, the second, third and fourth author refined the codes based on their suggestions but did not identify new codes. An inductive approach was used to connect the codes and identify themes relating to in-branch communication, branch staff roles, customer-centric initiatives and digitally driven branches with the human touch. Table  2 provides an overview of the coding criteria and theme identification process of the study.

In-branch communication with customers

Communication at the branch to educate customers about online banking channels with either self-service technology like Internet kiosks or specialised bank staff was the dominant factor reported by interviewees. Majority of interviewees believe that effective communication at branch level to guide customers for using technology to fulfil their banking needs can bring a positive change in customers’ perception, specifically in rural and semi-urban areas where customers rarely have hands-on experience in computers and Internet.

It is worth mentioning that no direct question regarding communication was asked to respondents during the interview. However, 13 out of 22 bankers agreed that communication with customers at the branch is a key effort to bring positive change in current trends. A typical comment from Banker 1 was:

There is no better approach than interacting with customers about modern technology-based banking channels; it is as much important as handling their (customers) queries atthe branch. As banks have already invested hugely in technology…. its acceptance is pertinent to banks.

Most of the bankers in rural and semi-urban areas were highlighting the need for live demonstration at bank branches and communicating the benefits of online banking channels to customers. But surprisingly, when asked about live demonstration practices at their institutions, there were only a few bankers who agreed to have interactive screens in the bank to educate customers about using digital banking. A colleague from the same bank argued that:

There is need to make strategical changes, with shrinking staff level and heavy branch footfall it is next to impossible for us (Bankers) to initiate personalise interactive sessions with customers regarding how to use technology-enabled banking channels. Dedicated digital tech experts in every branch especially in rural branches can help customers to make maximum use of online banking channels (Banker 6).

Customer satisfaction was observed by respondents as an important factor while demonstrating the use of online banking channels at the bank branch. Enduring relationship of the bank with its customers is the result of regular communication (Howcroft et al. 2002 ; Waite and Harrison 2002 ). Previous studies have already established the significance of possessing communication skills along with technical knowledge about the product by the sales force to provide maximum satisfaction to the customer (Goff et al. 1997 ). Our research findings also highlight that the introduction of new banking channels requires bankers to gain expertise not only in banking technology but also in communication skills to educate customers to use innovative banking channels, as customers’ trust in online banking is the positively related to effective communication among bank and its customers (Mukherjee and Nath 2003 ). One of the interviewees commented:

That first experience of customers with online channels defines their future chances of using it and effective interactive sessions at bank branch have great chances to make this first experience positive…. But again, it requires dedicated expert staff which most of our bank branches lack (Banker 19).

Another concerning issue which bank executives brought up during the study is using different communication approaches for different segments of customers. Various segments of bank customers exist based on their attitude and expected benefits (Machauer and Morgner 2001 ). The interview data suggest that with limited trained experts it is not feasible for banks to target all branch visiting customers for migrating to online banking channels. One bank executive from a private sector bank suggests that branch managers can segment customers based on customers’ frequency of branch visit. High-cost customers who visit branch more frequently can be targeted on the priority basis with high-touch and demonstrative communication approach to reduce the workload significantly. Thus, the challenge for banks is to identify the most appropriate mode of communication to interact with different segments of customers to convince them to adopt digital banking channels.

Redefining the role of branch staff

Many of the branch managers (16/22) reported that technology has redefined the role of branch staff in the digital era. Bankers perceive that by equipping branch staff with right soft skills and competencies in technology to solve the issues of customers and improve their banking experience, banks can expedite the online banking adoption in a more effective manner. Bank executives shared their perception about pressing need for changing the role of bank staff due to technological interventions in the banking sector. Banker 15 presented his views regarding internal challenges:

I believe ourworkforce performs multiple jobs at a time like advice customers on high-value products, handles daily transactions but still I am not sure our efforts are enough to equip our staff with right skills to optimally utilize technology and branch space to develop a close relationship with customers and improve branch productivity.

However, during interviews, it was observed that the scenarios are quite different between public and private sector banks in India. When asked “If there is any special front desk for a relationship manager to provide advisory services in the branch”, 85% respondents from public sector banks responded negatively. Branch staff role in public sector banks was still found to be confined to handling queries of customers with no specific front counter for the relationship manager to extend personal advisory services to customers at the branch. On the flip side, private sector bank branches demonstrate financial advisory services provided by trained personal advisor designated as the Relationship manager.

One interviewee who had previous experience with a private sector bank explained:

Technology has changed the way banking is done within the branches, but when it comes to encouraging people to adopt technology in an engaging way…public sector banks have a long way to go (Banker 5).

Interestingly, public banks in India are very available in remote and rural areas, unlike private banks. They handle much of total bank accounts in the country. We find that front desk staff in public banks lack adequate customer bonding. Since branch service quality influences the customers’ adoption of online banking services (Yap et al. 2010 ), there is need for these banks to focus on training their staff with interpersonal skills to become more productive and effective. This finding is also supported by Kaur et al. ( 2012 ) in a previous study in which they highlighted the significance of training the bank employees as per bank’s future strategies and plans to improve their job commitment. In this regard one interviewee from major public sector bank confesses:

In the era of technology, we need to establish a closer link between employees and customers if we want to see positive results. The workforce at the branch needs to be trained digitally to educate customers about new banking products and channels (Banker 6).

A colleague from the same bank argues that most of the branch visiting customers of public sector banks belong to a low-income group and lack even basic knowledge about banking activities and these customers generally engage staff with regular activities which can easily be done online. It was observed that lack of resources (time and staff) and long queues at branches make the situation more critical for public sector banks. However, proper training for branch staff to develop a positive attitude towards technology (Lymperopoulos and Chaniotakis 2004 ) and educating customers to use digital banking channels can help to serve the purpose for both parties.

Customer-centric initiatives to strengthen the relationship

Another important observation during interviews with bank executives was concerned with understanding individual customers’ preferences and needs at the branch. Bank executives described it as permanent pressure for improving customer services to survive in the present volatile and competitive market. Prior studies have also observed that offline fulfilment for customer satisfaction is as significant as online service quality (Semeijin et al. 2005 ). Twelve bank managers asserted that understanding the needs of customers and delivering tailored products to build customers’ trust in the bank, strengthens the bank-customer relationship. When asked about how would customers’ trust in the bank helps to sell digital banking products to customers, majority of bank executives responded that trust on digital banking is a function of customers’ perceived trustworthiness of bank. If customers trust the bank and its services, then they would intend to use its other digital mediums as well.

At the same time, bank executives from public sector banks expressed concern over the attitude of branch employees and organisational culture issues because they perceived that due to lack of motivation and heavy workload branch employees find it hard to provide individual attention to customers which in turn negatively affects the bank-customer relationship. Such a comment came from Banker 10:

We don’t have an active action plan to ensure the positive frontline employee involvement with customers at the branch which is imperative to improve the overall performance of organisation and bank-customer relationship in digital era.

Interestingly, Banker 17 presented a completely different perspective on this issue and recognised that much more is needed to be done in India to make digital banking an indispensable part of people’s life. When asked about the challenges in the way of establishing trust and the strong bank-customer relationship he responded:

With limited resources at branches, it’s not feasible to handle a large pool of branch customers at once to convince them to adopt digital banking channel especially when majority of your customers lacks trust and competency to use technology for banking transactions.

The interviewee findings reveal that on the part of banks, efforts are required in the direction of segmenting the customers at the branch on the basis of their investments with the bank, banking needs, demographic profile, frequency of branch visits and then targeting the high-cost customers on a priority basis by offering them right channel mix. For instance, even previous studies conducted in the USA have documented that 58% of transactions at bank branch are generated by 18% of customers (Toit and Burns 2016 ). Bankers perceive that customer relationship management (CRM) at branch provides an opportunity to deepen the relationship with customers which in turn helps to convince the customers to adopt digital banking channels. Strong customer relationship with the customer-centric approach is suggested to create better chances for banks to reduce operational costs and improve their market share. Most of the bank executives emphasised that better customer relationship can make it possible for banks to create customer segments and target high-touch clients in bank branch to increase return on investment.

Digitally driven branches with human touch

In the digital era, banks are not only embracing technology-based banking channels to conduct transactions online but also focusing on modernising the bank branches. Various previous studies have already established that bank branches cannot be replaced in the present digital world (Baxter and Rigby 2014 ; Charniauski and Freeborn 2015 ; Brunier et al. 2015 ). During the current study, 15 bank executives reported that the banks can think of modernising branches with in-branch digital capabilities so that they can educate customers about modern technologies using the same platform which in turn helps to reduce the workload of branch staff. Previous studies have also demonstrated the importance of in-branch self-service technology to persuade non-adopter to adopt online banking channels (Berger 2009 ). It is evident that RBI’s guidelines ( 2017 ) (May 2017) regarding digital banking outlets (e.g. SBI InTouch) have shifted the banking landscape in India. Banks in India are more inclined towards transforming existing branches than opening new ones.

When asked about the target customer segment, the majority of respondents were of the view that as a digital push initiative bank branch transformation intends to target predominantly the branch visitors who still prefer branch banking than digital channels. Few interviewees believed that even in the case of tech-savvy customers, the human touch is significant for customer satisfaction and behavioural intentions (Makarem et al. 2009 ). A participant from private sector bank gave the example of security and performance-based risk issues and how educating and informing customers about the security measures and benefits of digital banking channels through live demonstrations at the branch can build the trust of customers in digital banking (Martins et al. 2014 ).

Interestingly, while most of the bank managers recognised the significance of transforming the bank branches they also raised the concern over the cost of modernising and equipping all or most of the branches with self-service technology. One senior bank executive from a major public sector bank commented:

No doubt, all our branches need to be modernised and equipped with self-service kiosks and touch screens, but timing is not right due to high capital expenses involved. The best approach at this time can be to link digital banking channels to bank branches” (Banker 21).

Discussion of findings

Davis ( 1989 ) argues that perceived usefulness (PU) and perceived ease of use (PEOU) are the most significant determinants of technology adoption. TAM has established a strong and positive relationship between PU and technology adoption. Customers’ behaviour intention has found to be influenced by perceived usefulness in a study conducted by Alalwan et al. ( 2017 ). Various other researchers have also highlighted the significant impact of perceived usefulness on customers’ attitude and intention to use technology-enabled banking services (Wang et al. 2003 ; Juwaheer et al. 2012 ; Wentzel et al. 2013 ; Loureiro et al. 2014 ). Our research findings indicate that effective in-branch communication between branch staff and customers may significantly influence customers’ attitude and intentions to use digital banking channels. The study reveals that once customers are communicated and informed personally about the usefulness, convenience and ease of using digital banking channels, they may perform all their future banking transactions online (Sathye 1999 ; Pikkarainen et al. 2004 ).

The proposed technological interventions and methods need to be simpler to understand; otherwise, customers would resist the change and continue with the traditional banking practices. Perceived ease of use has been identified as an important factor positively influencing the attitude of customers regarding technology-enabled banking services (Marakarkandy et al. 2017 ). More specifically individual’s ability to use computer and technology positively influences the adoption of technology (Nath et al. 2013 ). The research findings depict that live demonstration in the digitally enabled branches with self-service kiosks can educate customers about how to use digital banking mediums which in turn will result in customers’ acceptance. This finding is in line with the previous study conducted by Roy et al. ( 2017 ) where lack of self-efficacy (competence to use Internet and banking applications) was seen to negatively affect customers’ perceived ease of use which consecutively was found to have the negative impact on customers’ adoption of Internet banking in India.

The extended TAM supports the notion that branch service quality influences the customers’ adoption of online banking services (Yap et al. 2010 ). There is a need for banks to focus on training their staff with interpersonal skills to become more productive and effective. The findings of the study show that effective customer financial advisory service at branch helps in attaining customers’ trust. The quality of services delivered by branch staff influences the customers’ adoption of online banking services. Previous studies have (Patricio et al. 2003 ; Yap et al. 2010 ) similarly highlighted that traditional service quality at branch leads to customers’ satisfaction and trust in Internet banking services. Further, offline fulfilment for customer satisfaction is as significant as online service quality (Semeijin et al. 2005 ). Our research findings reveal that customer-centric efforts at bank branch can improve the customers’ overall satisfaction and trust by developing and strengthening the personal relationship with customers. In other words, understanding the needs of customers and delivering tailored products to customers builds customers’ trust in the bank and strengthens the bank-customer relationship. Trust on digital banking was reported as a function of customers’ perceived trustworthiness of a bank (Fig. 2 ).

Theoretical implications of the study

The most prominent outcome of the present study pertains to the significance given to the in-branch customers’ experience and changing role of bank branches to encourage customers to adopt digital channel for conducting future banking transactions. This study proposed a model that highlights the impact of in-branch customer engagement on their intention to adopt digital banking channels in India. The present study contributes to the literature by studying how personalisation and in-branch initiatives can facilitate to build customers’ initial trust towards digital banking channels. In prior literature, some studies have been conducted on customers’ behavioural factors (Malhotra and Singh 2010 ; Singh and Kaur 2011 ; Sinha and Mukherjee 2016 ) with regard to technology acceptance in the Indian banking industry. However, our study is first to explore and understand the significance of in-branch efforts of banks to migrate customers to adopt digital banking channels. Impact of in-branch communication with the customers about technology-driven efforts has hardly received any scholarly attention.

Various studies have reported a strong, positive relationship between perceived usefulness, ease of use and customers’ attitude to adopt the technology (Wang et al. 2003 ; Juwaheer et al. 2012 ; Wentzel et al. 2013 ; Loureiro et al. 2014 ). Our research indicates that effective in-branch communication between branch staff and customers (Sathye 1999 ; Pikkarainen et al. 2004 ) and computer self-efficacy (Roy et al. 2017 ) developed through live demonstration in the digitally enabled branches may significantly influence the customers’ attitude and intention to use digital banking channels.

The study reveals that branch service quality influences the customers’ adoption of online banking services (Yap et al. 2010 ) by developing the trust of customers in e-banking services. Indian banks mainly public sector banks need to focus on training their staff with interpersonal skills to become more productive and effective. This finding is also supported by Kaur et al. ( 2012 ) in a previous study in which they highlighted the significance of training the bank employees as per bank’s future strategies and plans to improve their job commitment.

Our study supports the view that offline fulfilment for customer satisfaction is as significant as online service quality (Semeijin et al. 2005 ). Further, we add to the literature by establishing a direct relationship between customers’ trust in the bank and its e-banking services. The study emphasised the significance of customer relationship management (CRM) to identify the customer segments and target high-touch clients in a bank branch to increase return on investment.

Managerial implications

In emerging countries, the challenge for the banking industry is to meet the needs of highly distinctive segments of customers in urban, semi-urban and rural areas. Against all the sunny reports released by banking industry regarding digital banking adoption in India, our research findings suggest that banks need to take serious in-branch initiatives to educate and make a majority of customers comfortable with digital channels for banking payments and transactions. The present study elucidates the need to transform future bank branches by identifying cost-effective strategies. Trust on digital banking has been identified as a function of customers’ perceived trustworthiness of the bank. If customers trust the bank and its services, then they would intend to use the other digital mediums as well. Understanding and segmenting the branch visiting customers on the basis of how tech-savvy they are, their investments with the bank, banking needs, frequency of branch visits and then targeting the high-cost customers on a priority basis by offering them right channel mix (customer-centric approach) can make it possible for banks to increase return on investment and develop strong bank-customer relationship. Hence, banking regulators and industry should focus their attention to develop strong customer relationship management (CRM) practices in the branches to deepen the relationship with customers which in turn helps to build their trust in digital banking channels. One of the major hurdle in adopting the innovative digital banking channel is the lack of customers’ trust. Hence banks need to build the trust of customers through providing them personalised banking services by identifying the different segments of customers and offering them the right channel mix.

The study also identifies various integrated cultural and organisational obstacles particularly in public sector banks which hinder the customers’ adoption of digital banking. The banks need to focus the marketing strategy on enabling branches with digital capabilities, deploying more digitally trained employees in the branches to develop technological self-efficacy among customers to use innovative digital banking channels which in turn can help to reduce the digital divide in India.

This study draws the attention of the bank managers towards the need to design appropriate in-branch communication strategy by identifying various segments of branch visiting customers and make special efforts for the training of frontline branch staff (Cooper et al. 1994 ) to instil expertise not only in banking technology but also in communication skills. Further, our interview data suggest that banks in India are concerned about the high cost involved in branch digitisation. Banks need to understand that return on investment in technology would occur in the long run only if the large chunk of its customers migrates to digital channels and that is possible with the transformation of existing branch service model (Tang 2016 ). Migration of customers to digital banking channels in India calls for developing branch transformation strategy with the focus on a customer-centric approach. However, the branch transformation is seen to face various challenges, especially in the context of public sector banks in India. These issues raise the urgent need for focusing on improving in-branch practices of banks to convince customers to migrate to digital banking channels.

Due to COVID-19 maintaining physical distancing and providing in-branch services to customers is another challenge for banks in India with high number of branch visiting customers. In this strange time, banks can put a restriction on number of customers entering the branch at a time with flexible working hours to spread customer footfall and rotating staff. Additionally, visit by appointment only could be another alternative for banks to ensure the safety of customers and staff. The banks can also develop integrated services for customers in rural areas where business correspondents and India Post channel can provide banking services using digital tools at the door step of the customers with the purpose of reducing the number of customers visiting the branch.

Limitations of the study and future research

The study significantly contributes to the literature but with few limitations which can be addressed in future research. The present study concentrates on bank managers perceptions about in-branch efforts. For future research, it would be fruitful to trace out the perceptions of customers regarding the impact of in-branch efforts on their adoption of digital banking channels. Further, insights from this study could be used to frame a model for the impact of in-branch initiatives on customers’ adoption of digital banking that can be empirically tested. Future research can examine the impact of COVID-19 on digital banking and mobile payments acceptance in India as the current pandemic situation has encouraged customers to access remote banking services. Another avenue for future research is exploring the potential of modern agent network-based payment models in reaching out financially excluded section and examining whether these new models are opportunity or threat to the established digital channels.

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Kaur, S.J., Ali, L., Hassan, M.K. et al. Adoption of digital banking channels in an emerging economy: exploring the role of in-branch efforts. J Financ Serv Mark 26 , 107–121 (2021). https://doi.org/10.1057/s41264-020-00082-w

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Received : 22 April 2019

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Accepted : 19 November 2020

Published : 17 February 2021

Issue Date : June 2021

DOI : https://doi.org/10.1057/s41264-020-00082-w

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World Bank Supports Armenia’s Green, Inclusive and Sustainable Development

Yerevan, April 25, 2024 - The World Bank’s Board of Executive Directors approved a Development Policy Operation (DPO) in the amount of $116 million equivalent for Armenia to enable reforms aimed at promoting green, resilient and inclusive development. The DPO includes loan financing from the International Bank for Reconstruction and Development (IBRD) in the amount of EUR 92.3 million ($100 million equivalent) and a grant from the Global Concessional Financing Facility (GCFF) in the amount of $16 million.

This budget support will help the Government of Armenia to build climate resilience and reduce vulnerabilities to future shocks.

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The operation supports the Government’s five-year action plan for 2021-2026. It includes actions that will fortify anti-corruption measures by implementing a robust framework with a whistleblowing system and gift monitoring mechanism for public servants.  Further, it is aligned with the Paris Agreement. Specifically, the operation will support the government’s reforms in the following areas:

• Fostering climate change mitigation and adaptation and improving the regulatory framework for environmental management;
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Since starting its operations in Armenia in 1992, the World Bank has provided around $2.7 billion from IBRD, International Development Association (IDA), and various trust funds. Armenia became a donor to IDA in 2023. The World Bank is committed to continuing its support to Armenia in its development path for reducing poverty on livable planet.

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