Digital banking's effect on the banking industry & system transformation

https://doi.org/10.35912/amor.v6i4.2644
Published: May 22, 2025

Abstract:

Purpose: This study examines how digital banking has affected Bangladesh's banking industry by emphasizing its ramifications, difficulties, and revolutionary influences.

Research Methodology: With 200 participants and secondary sources, this study employs a mixed-methods approach and concludes that digital banking improves financial inclusion, convenience, and security. However, obstacles to complete adoption include societal problems, legislative restrictions, and inadequate infrastructure. While inequalities in digital literacy and geographic access continue to be major concerns, security, accessibility, and time efficiency are also important contributing variables.

Results: Although the results highlight the potential of digital banking to modernize the banking sector and promote economic growth, their wider application is limited by factors, including their geographical concentration and dependence on self-reported data.

Conclusions: Bangladesh has enormous potential for equitable growth and financial innovation compared with digital banking. Nevertheless, for widespread adoption, infrastructure deficiencies, digital illiteracy, and security issues must be addressed.

Limitations: This study's limitations include its dependence on self-reported data, regional focus, and inadequate technology infrastructure that affects the uptake of digital banking.

Contribution: This study advances our knowledge of how digital banking is changing conventional banking institutions and provides practical advice to industry executives and legislators on how to remove obstacles and create a more robust and inclusive financial system.

Novelty: This study emphasizes financial inclusion, technological obstacles, and specific recommendations for sustainable growth and innovation, highlighting the revolutionary influence of digital banking on Bangladesh's banking industry.

Keywords:
1. Agent Banking
2. Digital Banking
3. Evolution
4. MFS
5. Mobile Banking
Authors:
1 . Debobrota Kumar Sarker
South Asia Research & Corporate Advisory Ltd, Dhaka, Bangladesh
2 . Bipul Kumar Sarker
Habibullah Bahar College, Dhaka, Bangladesh
3 . Shompa Rani Shaha
SouthAsia Research & Corporate Advisory Ltd, Dhaka, Bangladesh
4 . Sajib Sarker
Bangladesh Bank, Bangladesh
5 . Ali Borddin
Habibullah Bahar College, Dhaka, Bangladesh
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How to Cite
Sarker, D. K., Sarker, B. K., Shaha, S. R., Sarker, S., & Borddin, A. (2025). Digital banking’s effect on the banking industry & system transformation. Annals of Management and Organization Research, 6(4), 371–384. https://doi.org/10.35912/amor.v6i4.2644
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Issue & Section
Vol. 6 No. 4 (2025): May
Articles
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This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

References

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    Alkhowaiter, W. A. (2020). Digital payment and banking adoption research in Gulf countries: A systematic literature review. International Journal of Information Management, 53, 102102. doi:https://doi.org/10.1016/j.ijinfomgt.2020.102102

    Anjum, M. I. (2016). An inquiry into alternative models of Islamic banking. Journal of Islamic Economics Banking and Finance, 12(4), 419. doi:https:/doi.org/10.12816/0050981

    Anwar, A., Thongpapanl, N., & Ashraf, A. R. (2021). Strategic imperatives of mobile commerce in developing countries: the influence of consumer innovativeness, ubiquity, perceived value, risk, and cost on usage. Journal of Strategic Marketing, 29(8), 722-742. doi:https://doi.org/10.1080/0965254X.2020.1786847

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    Fathima, J. S. (2020). Challenge management of banking services-with special reference to virtual banking service challenges. Shanlax International Journal of Management, 7(3), 57-66. doi:10.34293/management.v7i3.1620

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    Indriasari, E., Gaol, F. L., & Matsuo, T. (2019). Digital banking transformation: Application of artificial intelligence and big data analytics for leveraging customer experience in the Indonesia banking sector. Paper presented at the 2019 8th International Congress on Advanced Applied Informatics (IIAI-AAI).

    Kitsios, F., Giatsidis, I., & Kamariotou, M. (2021). Digital transformation and strategy in the banking sector: Evaluating the acceptance rate of e-services. Journal of Open Innovation: Technology, Market, and Complexity, 7(3), 204. doi:https://doi.org/10.3390/joitmc7030204

    Koroleva, E. V., & Kudryavtseva, T. (2019). Factors influencing digital bank performance. Paper presented at the The 2018 International Conference on Digital Science.

    Krasonikolakis, I., Tsarbopoulos, M., & Eng, T.-Y. (2020). Are incumbent banks bygones in the face of digital transformation? Journal of General Management, 46(1), 60-69. doi:https://doi.org/10.1177/0306307020937883

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    Nguyen, O. T. (2020). Factors affecting the intention to use digital banking in Vietnam. The Journal of Asian Finance, Economics and Business, 7(3), 303-310. doi:https://doi.org/10.13106/jafeb.2020.vol7.no3.303

    Ozili, P. K. (2018). Impact of digital finance on financial inclusion and stability. Borsa Istanbul Review, 18(4), 329-340. doi:https://doi.org/10.1016/j.bir.2017.12.003

    Paria, I., & Giri, A. (2018). A Literature Review on Impact of Digitalization on Indian Rural Banking System and Rural Economy. RESEARCH REVIEW International Journal of Multidisciplinary, 3(11), 224-227. doi:https://doi.org/10.5281/zenodo.1488103

    Payne, E. H. M., Dahl, A. J., & Peltier, J. (2021). Digital servitization value co-creation framework for AI services: a research agenda for digital transformation in financial service ecosystems. Journal of Research in Interactive Marketing, 15(2), 200-222. doi:https://doi.org/10.1108/JRIM-12-2020-0252

    Pervin, T., & Sarker, B. K. (2021). The evolution and prospect of agent banking in Bangladesh: A study based on Bangladesh banking sectors. Journal of Business Management and Economic Research, 5(4), 121-134. doi:https://doi.org/10.29226/TR1001.2021.271

    Pio, P. G., Sigahi, T., Rampasso, I. S., Satolo, E. G., Serafim, M. P., Quelhas, O. L., . . . Anholon, R. (2024). Complaint management: comparison between traditional and digital banks and the benefits of using management systems for improvement. International Journal of Productivity and Performance Management, 73(4), 1050-1070. doi:https://doi.org/10.1108/IJPPM-08-2022-0430

    Puspitadewi, I. (2019). Pengaruh digitalisasi perbankan terhadap efektivitas dan produktivitas kerja pegawai. Jurnal Manajemen Dan Bisnis Indonesia, 5(2), 247-258. doi:https://doi.org/10.32528/jmbi.v5i2.2925

    Rouf, M. A., & Babu, M. A. (2023). User's Adoption of Mobile Financial Service (MFS): An Application of the Structural Equation Model (SEM). Scope, 13(2), 539-551.

    Sarker, B. K., Sarker, D. K., Shaha, S. R., Saha, D., & Sarker, S. (2024a). The Effect of Mobile Banking on the Financial Performance of Commercial Banks in Bangladesh. doi:https://doi.org/10.51244/IJRSI.2024.1109045

    Sarker, B. K., Sarker, D. K., Shaha, S. R., Saha, D., & Sarker, S. (2024). Understanding Behavioral Intentions: How Customers Decide to Adopt Internet Banking in Bangladesh. Annals of Management and Organization Research, 6(2), 153-166. doi:https://doi.org/10.35912/amor.v6i2.2402

    Sarker, B. K., Sarker, D. K., Shaha, S. R., Saha, D., & Sarker, S. (2024b). Why Apply SPSS, SmartPLS and AMOS: An Essential Quantitative Data Analysis Tool for Business and Social Science Research Investigations. International Journal of Research and Innovation in Social Science, 8(9), 2688-2699.

    Schuelke-Leech, B.-A. (2018). A model for understanding the orders of magnitude of disruptive technologies. Technological Forecasting and Social Change, 129, 261-274. doi:https://doi.org/10.1016/j.techfore.2017.09.033

    Sharif, A., & Raza, S. A. (2017). The influence of hedonic motivation, self-efficacy, trust and habit on adoption of internet banking: a case of developing country. International Journal of Electronic Customer Relationship Management, 11(1), 1-22. doi:https://doi.org/10.1504/IJECRM.2017.086750

    Shettar, R. M., & Sheshgiri, M. (2019). Digital Banking An Indian Perspective. IOSR Journal of Economics and Finance, 10(3), 01-05.

    Singh, V., Chen, S.-S., Singhania, M., Nanavati, B., & Gupta, A. (2022). How are reinforcement learning and deep learning algorithms used for big data based decision making in financial industries–A review and research agenda. International Journal of Information Management Data Insights, 2(2), 100094. doi:https://doi.org/10.1016/j.jjimei.2022.100094

    Skinner, C. (2014). Digital bank: Strategies to launch or become a digital bank: Marshall Cavendish International Asia Pte Ltd.

    Stoeckli, E., Dremel, C., & Uebernickel, F. (2018). Exploring characteristics and transformational capabilities of InsurTech innovations to understand insurance value creation in a digital world. Electronic markets, 28, 287-305. doi:https://doi.org/10.1007/s12525-018-0304-7

    Tamaruddin, T., Firdaus, A., & Endri, E. (2020). Customer satisfaction mediates the effect of self service technology on customer loyalty in of islamic bank E-banking services in indonesia. ILTIZAM Journal of Shariah Economics Research, 4(2), 1-15. doi:https://doi.org/10.30631/iltizam.v4i2.596

    Udin, U. (2023). Linking transformational leadership to organizational learning culture and employee performance: The mediation-moderation model. International Journal of Professional Business Review: Int. J. Prof. Bus. Rev., 8(3), 16. doi:https://10.26668/businessreview/2023.v8i3.1229

    Vally, K. S., & Divya, K. H. (2018). A Study on Digital Payments in India with Perspective of Consumer's Adoption. International Journal of Pure and Applied Mathematics, 119(15), 1259-1267.

    Vial, G. (2021). Understanding digital transformation: A review and a research agenda. Managing digital transformation, 13-66.

    Windasari, N. A., Kusumawati, N., Larasati, N., & Amelia, R. P. (2022). Digital-only banking experience: Insights from gen Y and gen Z. Journal of Innovation & Knowledge, 7(2), 100170.

    Yazid, Z. E., Zainol, Z., & Bakar, J. A. (2023). E-commerce via mobile banking: contemporary shariah issues and ways to address them. International Journal of Professional Business Review: Int. J. Prof. Bus. Rev., 8(1), 14.

    Zaib, R., & Ourabah, O. (2023). Large scale data using K-means. Mesopotamian Journal of Big Data, 2023, 36-45. doi:https://doi.org/10.58496/MJBD/2023/006

    Zhao, Q., Tsai, P.-H., & Wang, J.-L. (2019). Improving financial service innovation strategies for enhancing china’s banking industry competitive advantage during the fintech revolution: A Hybrid MCDM model. Sustainability, 11(5), 1419. doi:https://doi.org/10.3390/su11051419

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  2. Alkhowaiter, W. A. (2020). Digital payment and banking adoption research in Gulf countries: A systematic literature review. International Journal of Information Management, 53, 102102. doi:https://doi.org/10.1016/j.ijinfomgt.2020.102102
  3. Anjum, M. I. (2016). An inquiry into alternative models of Islamic banking. Journal of Islamic Economics Banking and Finance, 12(4), 419. doi:https:/doi.org/10.12816/0050981
  4. Anwar, A., Thongpapanl, N., & Ashraf, A. R. (2021). Strategic imperatives of mobile commerce in developing countries: the influence of consumer innovativeness, ubiquity, perceived value, risk, and cost on usage. Journal of Strategic Marketing, 29(8), 722-742. doi:https://doi.org/10.1080/0965254X.2020.1786847
  5. Bueno, L. A., Sigahi, T. F., & Anholon, R. (2023). Digital banks in Brazil: Struggling to reach the breakeven point or a new evolution wave? FinTech, 2(3), 374-387. doi:https://doi.org/10.3390/fintech2030021
  6. Busby, D. (2017). Adopting the best approach for a digital banking solution: Combine the benefits of the ‘build’,‘buy’or ‘outsource’options. Journal of Digital Banking, 2(1), 43-50.
  7. Diener, F., & Špa?ek, M. (2021). Digital transformation in banking: A managerial perspective on barriers to change. Sustainability, 13(4), 2032. doi:https://doi.org/10.3390/su13042032
  8. Fathima, J. S. (2020). Challenge management of banking services-with special reference to virtual banking service challenges. Shanlax International Journal of Management, 7(3), 57-66. doi:10.34293/management.v7i3.1620
  9. Golden S, A. R. (2017). An Overview of Digitization in Indian Banking Sector. Indo-Iranian Journal of Scientific Research (IIJSR), 1(1), 209-212.
  10. Indrasari, A., Nadjmie, N., & Endri, E. (2022). Determinants of satisfaction and loyalty of e-banking users during the COVID-19 pandemic. International Journal of Data and Network Science, 6(2), 497-508. doi:https://doi.org/10.5267/j.ijdns.2021.12.004
  11. Indriasari, E., Gaol, F. L., & Matsuo, T. (2019). Digital banking transformation: Application of artificial intelligence and big data analytics for leveraging customer experience in the Indonesia banking sector. Paper presented at the 2019 8th International Congress on Advanced Applied Informatics (IIAI-AAI).
  12. Kitsios, F., Giatsidis, I., & Kamariotou, M. (2021). Digital transformation and strategy in the banking sector: Evaluating the acceptance rate of e-services. Journal of Open Innovation: Technology, Market, and Complexity, 7(3), 204. doi:https://doi.org/10.3390/joitmc7030204
  13. Koroleva, E. V., & Kudryavtseva, T. (2019). Factors influencing digital bank performance. Paper presented at the The 2018 International Conference on Digital Science.
  14. Krasonikolakis, I., Tsarbopoulos, M., & Eng, T.-Y. (2020). Are incumbent banks bygones in the face of digital transformation? Journal of General Management, 46(1), 60-69. doi:https://doi.org/10.1177/0306307020937883
  15. Maulidya, G. P., & Afifah, N. (2021). Perbankan dalam era baru digital: menuju bank 4. 0. Paper presented at the Proceeding Seminar Bisnis Seri V.
  16. media.bain.com. (2014). Customer Loyalty in Retail Banking: Global Edition 2014. Retrieved from https://media.bain.com/Images/DIGEST_Customer_loyalty_in_retail_banking_2014.pdf
  17. Newton, A. (2016). Hype cycle for digital banking transformation. Stamford: Gartner Group.
  18. Ngamal, Y., & Perajaka, M. A. (2022). Penerapan Model Manajemen Risiko Teknologi Digital Di Lembaga Perbankan Berkaca Pada Cetak Biru Transformasi Digital Perbankan Indonesia. Jurnal Manajemen Risiko, 2(2), 59-74. doi:https://doi.org/10.33541/mr.v2iIV.4099
  19. Nguyen, O. T. (2020). Factors affecting the intention to use digital banking in Vietnam. The Journal of Asian Finance, Economics and Business, 7(3), 303-310. doi:https://doi.org/10.13106/jafeb.2020.vol7.no3.303
  20. Ozili, P. K. (2018). Impact of digital finance on financial inclusion and stability. Borsa Istanbul Review, 18(4), 329-340. doi:https://doi.org/10.1016/j.bir.2017.12.003
  21. Paria, I., & Giri, A. (2018). A Literature Review on Impact of Digitalization on Indian Rural Banking System and Rural Economy. RESEARCH REVIEW International Journal of Multidisciplinary, 3(11), 224-227. doi:https://doi.org/10.5281/zenodo.1488103
  22. Payne, E. H. M., Dahl, A. J., & Peltier, J. (2021). Digital servitization value co-creation framework for AI services: a research agenda for digital transformation in financial service ecosystems. Journal of Research in Interactive Marketing, 15(2), 200-222. doi:https://doi.org/10.1108/JRIM-12-2020-0252
  23. Pervin, T., & Sarker, B. K. (2021). The evolution and prospect of agent banking in Bangladesh: A study based on Bangladesh banking sectors. Journal of Business Management and Economic Research, 5(4), 121-134. doi:https://doi.org/10.29226/TR1001.2021.271
  24. Pio, P. G., Sigahi, T., Rampasso, I. S., Satolo, E. G., Serafim, M. P., Quelhas, O. L., . . . Anholon, R. (2024). Complaint management: comparison between traditional and digital banks and the benefits of using management systems for improvement. International Journal of Productivity and Performance Management, 73(4), 1050-1070. doi:https://doi.org/10.1108/IJPPM-08-2022-0430
  25. Puspitadewi, I. (2019). Pengaruh digitalisasi perbankan terhadap efektivitas dan produktivitas kerja pegawai. Jurnal Manajemen Dan Bisnis Indonesia, 5(2), 247-258. doi:https://doi.org/10.32528/jmbi.v5i2.2925
  26. Rouf, M. A., & Babu, M. A. (2023). User's Adoption of Mobile Financial Service (MFS): An Application of the Structural Equation Model (SEM). Scope, 13(2), 539-551.
  27. Sarker, B. K., Sarker, D. K., Shaha, S. R., Saha, D., & Sarker, S. (2024a). The Effect of Mobile Banking on the Financial Performance of Commercial Banks in Bangladesh. doi:https://doi.org/10.51244/IJRSI.2024.1109045
  28. Sarker, B. K., Sarker, D. K., Shaha, S. R., Saha, D., & Sarker, S. (2024). Understanding Behavioral Intentions: How Customers Decide to Adopt Internet Banking in Bangladesh. Annals of Management and Organization Research, 6(2), 153-166. doi:https://doi.org/10.35912/amor.v6i2.2402
  29. Sarker, B. K., Sarker, D. K., Shaha, S. R., Saha, D., & Sarker, S. (2024b). Why Apply SPSS, SmartPLS and AMOS: An Essential Quantitative Data Analysis Tool for Business and Social Science Research Investigations. International Journal of Research and Innovation in Social Science, 8(9), 2688-2699.
  30. Schuelke-Leech, B.-A. (2018). A model for understanding the orders of magnitude of disruptive technologies. Technological Forecasting and Social Change, 129, 261-274. doi:https://doi.org/10.1016/j.techfore.2017.09.033
  31. Sharif, A., & Raza, S. A. (2017). The influence of hedonic motivation, self-efficacy, trust and habit on adoption of internet banking: a case of developing country. International Journal of Electronic Customer Relationship Management, 11(1), 1-22. doi:https://doi.org/10.1504/IJECRM.2017.086750
  32. Shettar, R. M., & Sheshgiri, M. (2019). Digital Banking An Indian Perspective. IOSR Journal of Economics and Finance, 10(3), 01-05.
  33. Singh, V., Chen, S.-S., Singhania, M., Nanavati, B., & Gupta, A. (2022). How are reinforcement learning and deep learning algorithms used for big data based decision making in financial industries–A review and research agenda. International Journal of Information Management Data Insights, 2(2), 100094. doi:https://doi.org/10.1016/j.jjimei.2022.100094
  34. Skinner, C. (2014). Digital bank: Strategies to launch or become a digital bank: Marshall Cavendish International Asia Pte Ltd.
  35. Stoeckli, E., Dremel, C., & Uebernickel, F. (2018). Exploring characteristics and transformational capabilities of InsurTech innovations to understand insurance value creation in a digital world. Electronic markets, 28, 287-305. doi:https://doi.org/10.1007/s12525-018-0304-7
  36. Tamaruddin, T., Firdaus, A., & Endri, E. (2020). Customer satisfaction mediates the effect of self service technology on customer loyalty in of islamic bank E-banking services in indonesia. ILTIZAM Journal of Shariah Economics Research, 4(2), 1-15. doi:https://doi.org/10.30631/iltizam.v4i2.596
  37. Udin, U. (2023). Linking transformational leadership to organizational learning culture and employee performance: The mediation-moderation model. International Journal of Professional Business Review: Int. J. Prof. Bus. Rev., 8(3), 16. doi:https://10.26668/businessreview/2023.v8i3.1229
  38. Vally, K. S., & Divya, K. H. (2018). A Study on Digital Payments in India with Perspective of Consumer's Adoption. International Journal of Pure and Applied Mathematics, 119(15), 1259-1267.
  39. Vial, G. (2021). Understanding digital transformation: A review and a research agenda. Managing digital transformation, 13-66.
  40. Windasari, N. A., Kusumawati, N., Larasati, N., & Amelia, R. P. (2022). Digital-only banking experience: Insights from gen Y and gen Z. Journal of Innovation & Knowledge, 7(2), 100170.
  41. Yazid, Z. E., Zainol, Z., & Bakar, J. A. (2023). E-commerce via mobile banking: contemporary shariah issues and ways to address them. International Journal of Professional Business Review: Int. J. Prof. Bus. Rev., 8(1), 14.
  42. Zaib, R., & Ourabah, O. (2023). Large scale data using K-means. Mesopotamian Journal of Big Data, 2023, 36-45. doi:https://doi.org/10.58496/MJBD/2023/006
  43. Zhao, Q., Tsai, P.-H., & Wang, J.-L. (2019). Improving financial service innovation strategies for enhancing china’s banking industry competitive advantage during the fintech revolution: A Hybrid MCDM model. Sustainability, 11(5), 1419. doi:https://doi.org/10.3390/su11051419