Digitization effects on banks’ financial performance: the case of an African country

Abstract

Purpose The concept of digitization covers a wide range of initiatives to achieve sustainable development. This paper aims to determine the impact of bank digitization strategies on financial performance in an African country. Design/methodology/approach This study used the generalized least squares estimation method to analyze data from a sample of 12 Tunisian banks from 2010 to 2020. The reason for selecting this method was its ability to address issues of heteroscedasticity and autocorrelation. Findings This study indicates that digital transformation has a positive effect on Tunisian banks financial performance, as measured by return on assets and return on equity. Specifically, investing in payment tools, digital channels and internet security leads to improved performance for banks. These findings suggest that banks that offer digital services perform better, as they are able to increase profitability, maintain financial stability and improve transparency. Research limitations/implications This study is important for central bank, regulators, policymakers and investors. Overall, this study emphasizes the need for banks in Tunisia to embrace digital transformation to improve their performance and remain viable in the modern business landscape. Originality/value This study ponders the effect of Tunisian banks’ digital transformation on financial performance. Tunisia context serves as model for other African countries. Tunisian banks should prioritize investments in digital technologies to stay competitive in the market.