The Impact of Digitalization on the Transformation of the Banking Sector: Challenges, Opportunities, and Future Prospects (African Scientific Journal)

Summary

• The article is a thematic literature review of how digitalisation affects the performance of financial institutions.p.3
• Digitalisation improves operational performance through transaction cost reduction and process automation, and relational performance through personalisation and customer experience.p.3
• The rise of fintechs is interpreted as the primary driver of this transformation.p.3
• Cybersecurity, organisational resistance and skills adaptation condition the realisation of the expected benefits.p.3
• Open banking shifts the bank-fintech relationship from head-on competition towards collaboration.p.12
• A branch transaction is estimated to cost several dozen times more than one made through a mobile app.p.13
• Few studies measure the impact of digitalisation on return on equity, cost-to-income ratio or loan quality.p.16

Key insights

1. Digital transformation is a structural disruption of the banking sector, not an incremental change.p.11
2. Fintechs benefit from much lower structural costs than traditional banks because they have no branch networks or legacy IT systems.p.12
3. Digital channels reduce banks' distribution costs significantly compared with physical channels.p.13
4. Open digital ecosystems allow banks to offer a distinctive customer experience and strengthen their competitive positioning.p.14
5. Digital transformation projects often fail because of insufficient leadership buy-in and internal resistance rather than technology gaps.p.15
6. A shortage of data scientists and cybersecurity experts can slow the implementation of digital strategies.p.15
7. Customer-experience literature relies mostly on satisfaction perceptions rather than observed behaviour.p.16