THE IMPACT OF DIGITAL FINANCIAL SERVICES ON THE FINANCIAL

PERFORMANCE OF COMMERCIAL BANKS

CHAPTER ONE

INTRODUCTION

1.1. Background of the study

The global financial landscape is undergoing a radical transformation driven by technological

advancements, leading to the emergence and rapid evolution of digital financial services
(DFS). DFS, encompassing mobile banking, online payments, electronic wallets, internet
banking, and other innovative solutions, have become a catalyst for revolutionizing
traditional banking operations. They promise enhanced financial inclusion, reduced
operational costs, accelerated transactions, and an improved customer experience (Manyika et
al., 2016; World Bank, 2018).

In Africa, and particularly in Cameroon, the widespread adoption of mobile technology and
expanding internet access have created fertile ground for the growth of DFS. Douala, as the
economic hub of Cameroon, is an arena of intense competition among commercial banks
striving to adapt to evolving consumer preferences and technological demands. The
implementation of DFS is viewed as a strategic imperative for banks aiming to maintain their
competitiveness, expand their customer base, and optimize their operations (IMF, 2020;
Nkundabanyanga et al., 2021).

However, despite the evident advantages and pervasive adoption of DFS, empirical data
specifically on their impact on the financial performance of commercial banks in developing
economies, such as Cameroon, remains limited. Banks in Douala are investing significant
resources into digital transformation, but without a clear understanding of the actual return on
these investments, their strategic decisions may be suboptimal (Chen & Yeh, 2021). Thus,
there is a pressing need for a systematic study that can quantitatively assess and analyze the
relationship between the adoption of DFS and key financial indicators of banks, such as
profitability, efficiency, and liquidity, within the specific context of Douala. This research
aims to fill this gap by providing evidence-based insights into how DFS adoption translates
into tangible financial outcomes for commercial banks in the region (Mabika & Maiga,
2022).
However, despite the noticeable impact of DFS, challenges persist. Issues such as
cybersecurity threats, low financial literacy, poor internet infrastructure, and customer
skepticism about digital platforms are prevalent. Additionally, the direct correlation between
DFS and financial performance in commercial banks is still a subject of debate in Douala,
necessitating further research.

The need for every business is to be effective and efficient while profitably rendering services
to their customers. As a result, the implications of Information and communication
Technology (ICT) adoption and use for the global financial system have been fundamental.
ICT has not only transformed transaction processes of rendering banking services but is also
associated with shifting organisational boundaries, facilitating the creation of new financial
products, changing the nature of work, globalizingfinancial markets and restructuring the
character of financial intermediation (Scott, Reenen and Zachariadis, 2017). With the
emergence of consumer rights and rapid technological advancements in the 1960s, there was
a significant shift in both retail and corporate banking. As a result of the dominant influence
of customers, most of these processes now are being done electronically or via the bank’s
official website with complex algorithms, also known as Digitalisation or digital financial
services giving rise to new customer preferences which banks must [Link]
Technology opportunities and the landscape in rules and regulations are fast changing. Just a
few months ago (as at the time of
writing), a local bank in Iceland made the loan application process check possible in just
three (3) minutes for individuals through the bank´s mobile application. Before, the same
process took the customer about ten days to complete. With this process, the bank has
eliminated all physical contacts
between bank officials and the customers, enabling tfor the application at their convenience.
Barry(2018) pointed out that, due to mobile banking services, the normal time for savings has
reduced by 30% while that of withdrawals has reduced by 70%. Most recent projections
estimate that around 30% to 40% of all current service-related processes will be replaced with
a digitalised workforce (Lamberton and Stephen, 2016). According to Porkelsson (2017) this
shows that the need for human interference is getting less important and the use of automated
processes, whether it’s with artificial intelligence or other robotic automation, is rapidly
taking over. Ayuketang (2018) noted that digital financial services have led to a situation in
which information, communication and commerce are no longer limited by time and
Geographical space. By definition, digital financial service is the provision of a broad range
of financial services that can be accessed and delivered through digital channels in order to
execute financial transactions such as payments, savings, remittances and insurance
(Kambale, nd). Today, Africa is home to more digital financial service deployments than any
other region in the world. Ten years after the breakthrough of digital financial services in
Sub-SaharanAfrica, there is evidence of this, with about half of nearly 700 million individual
users worldwide (LeHouerou, 2018). In the African continent, the digital financial service
impacts on the financial sector can easily be linked to the amount of people using internet
banking for settling their bills because it is the main factor for the average people in the
banking errands (Pohjola 2015 as cited in Mueni, 2017). The financial system in the
Economic Community of Central African States (CEMAC) is bank dominated and mostly
foreign owned. Cameroon Gabon, the two largest economic powers in the sub-region,
account for about three fourths (3/4) of total assets and loans (Saab and Vacher, 2007). At the
end of the seminar on how to achieve financial inclusion and digital transformation of the
banking and financial services sector in Cameroon profitably, Limunga (2019) recommended
that it appears imperative for banks in Cameroon to go digital, as 60% of Cameroonians are
unbanked, while about 9.5 million of them have already adopted mobile finance. This study
examines the influence of Digital Savings Services, Digital Transfers Services, Digital
Withdrawals Services and Digital Payment Services on the profitability of commercial banks
in Cameroon.

1.2. Problem Statement

The financial performance of commercial banks in Douala is increasingly being shaped by

the rise and adoption of digital financial services. While many banks have invested
significantly in technologies such as mobile banking apps, online platforms, and digital
payment systems, there is limited empirical evidence to determine whether these innovations
have translated into measurable financial benefits such as increased profit margins, improved
cost efficiency, and expanded customer bases.

Moreover, customer trust, digital literacy, and accessibility to stable technology infrastructure
remain challenges that affect the optimal deployment of DFS. The absence of concrete data
and analysis on how these factors influence banks' financial outcomes creates a gap in
understanding, making it unclear whether the adoption of DFS has been a net positive for
commercial banks in Douala. This study aims to address this research gap by examining the
impact of digital financial services on the financial performance of these banks.
1.3. Research questions

1.3.1. Main question

What is the impact of digital financial services on the financial performance of commercial
banks?

1.3.2. Specific questions

-How does mobile banking services influence profitability of commercial banks in Douala?

-what is the effect of online (internet) banking platforms on the profitability of commercial
bank in Douala?

-what is the effect of mobile money services on the profitability of commercial banks in
Douala?

- How does automated banking services influence the profitability of commercial banks in
Douala?

1.4. Research objectives

1.4.1. Main Objective

To evaluate the impact of digital financial services on the financial performance of

commercial banks in Douala, Cameroon.

1.4.2. Specific Objectives

1. To assess how mobile banking services influence the profitability of commercial banks in
Douala.

2. To analyze the effect of online banking platforms on the profitability of commercial banks
in Douala.

3. To analyze the effect of mobile money services on the profitability of commercial banks in
Douala

4. To evaluate the effect of automated banking services on the profitability of commercial

banks on the profitability of commercial banks in Douala.
1.5. Hypothesis

H₀: Digital banking services have no significant impact on the profitability of commercial
banks in Douala.

H₁: Digital banking services significantly impact the profitability of commercial banks in
Douala.

1.6. significance of the study

The importance of this study lies in its ability to provide a multi-layered understanding of
how technology is reshaping the banking industry, moving from a global perspective down to
the specific local context of Douala.

At the Global Level, this study is significant because it contributes to the ongoing global
discourse on the "Fintech Revolution." As the world moves toward a cashless economy,
understanding the relationship between digital transformation and bank stability is crucial.
This research provides empirical evidence from an emerging market, helping international
financial organizations (like the IMF or World Bank) understand how digital adoption affects
the resilience of financial systems in developing regions compared to Western economies.

At the African Level, Africa is currently the global leader in mobile money and
"leapfrogging" traditional banking infrastructure. This study is significant for the African
continent as it highlights the competitive dynamics between traditional commercial banks and
Mobile Network Operators (MNOs). The findings can serve as a blueprint for other African
nations in the CEMAC and ECOWAS zones, showing how banks can integrate Digital
Financial Services (DFS) to drive financial inclusion while maintaining profitability.

In Cameroon, where the banking sector is undergoing rapid modernization under the
supervision of COBAC (Commission Bancaire de l'Afrique Centrale), this study is highly
relevant for:

Policy Makers & Regulators: It provides data that can help the Ministry of Finance and
COBAC formulate regulations that encourage digital innovation while mitigating risks like
cyber-fraud and liquidity volatility.

Economic Stability: By identifying which digital services drive performance, the study helps
in strengthening the national financial backbone.
Douala as the economic capital and the hub of the highest volume of financial transactions in
Cameroon, Douala is the ultimate testing ground for DFS. This study is significant for:

Bank Managers in Douala: It offers actionable insights into which specific digital
investments (e.g., mobile apps vs. internet banking vs. ATMs) yield the highest Return on
Investment (ROI) in the Douala urban market.

SMEs and Corporations: Since most businesses in Douala rely on these banks, the study
sheds light on how digital efficiency can lead to better service delivery for the city’s business
community.

For the Researcher, this research is of paramount importance to the researcher for several
reasons:

Academic Contribution: It allows the researcher to fill a critical gap in local literature, as
there is limited quantitative data specifically focused on the Douala banking sector.

Practical Expertise: It equips the researcher with deep analytical skills and specialized
knowledge in "Digital Finance," a field that is currently in high demand in the job market.

Academic Fulfillment: It serves as a partial fulfillment of the requirements for the award of
an academic degree, demonstrating the researcher's ability to conduct rigorous scientific
inquiry.

Conclusively, this study will provide valuable insights into how digital financial services
contribute to the overall performance of commercial banks in Douala. The findings will assist
policymakers, bank executives, and other stakeholders in making informed decisions to
optimize the benefits of DFS while minimizing associated challenges. Additionally, it will
contribute to the academic discussion on digital transformation in the banking sector.
 CHAPTER TWO

LETERATURE REVIEW

2.1 Conceptual Literature

2.1.1. Concept of Digital Banking

Naison Louis et al (2025), Digital banking in Africa. In a research aimed at measuring the
challenges of digital financial services in African nations defined Digital banking as the
transformation of traditional banking services into digital formats, allowing customers to
manage their financial accounts, conduct transactions, and access various banking services
through digital channels. This includes online banking, mobile banking, and mobile apps,
which provide a seamless and convenient banking experience that can be accessed via a
mobile device. By leveraging digital banking services, customers can enjoy a secure and
personalized approach to managing their finances, with the ability to securely access their
accounts at any time, without the need to visit a physical bank branch. This digitization of
banking services ensures that customers have 24/7 access to their accounts and can perform a
wide range of banking activities, including the ability to deposit money, from the comfort of
their homes or on the go.

Digital Banking The banking sector has seen a paradigm shift due to the onset of digital
transformation, which has changed how traditional banking operations are conducted and
how financial institutions engage with customers (Al-Dmour, Asfour, Al-Dmour, & Al-
Dmour, 2022). In addition to streamlining internal procedures, this technological
advancement has transformed consumer interaction through creative digital platforms
(Bueno, Sigahi, & Anholon, 2023; Pio et al., 2024). A digital ecosystem that crosses time
zones and geographic barriers has been made possible by rapid breakthroughs in artificial
intelligence, data analytics, high-layered datasets (Zaib & Ourabah, 2023), and information
technology (Singh, Chen, Singhania, Nanavati, & Gupta, 2022). Digital banking is the
practice of providing banking services without the need for in-person branch visits by
utilizing digital platforms and technology (Windasari, Kusumawati, Larasati, & Amelia,
2022) such as websites, mobile applications, and automated systems (Nguyen, 2020;
Puspitadewi, 2019). It provides services, including cash transfers, bill payments, loan
applications, and account management, allowing users to access, manage, and carry out
financial operations online. Convenience, effectiveness, and round-the-clock accessibility are
prioritized in this strategy (Diener and Špaček 2021; Fathima 2020; Schuelke-Leech 2018).

2.1.2 Concept of Digital financial services

Broad Spectrum of Services (Ozili, 2018) Digital finance is defined as the technology,
applications, and systems used to provide banking and financial services over the internet,
including mobile money, digital wallets, and peer-to-peer applications
Mass-Market Solution (World Bank/CGAP): DFS are viewed as a tool for finding large-scale
solutions to financial exclusion, aiming to provide services directly into customers' mobile
phones, particularly for the underbanked in developing countries.
Fintech-Driven Transformation (TandF Online, 2020): Digital financial services are often
synonymous with Financial Technology (Fintech), utilizing digital transfer methods, mobile
apps, and QR codes to provide financial services.
Components of Digital Finance (Semenog et al., 2021): Authors describe DFS as a product of
the fintech sector that integrates digital transactional platforms, retail agents (for
cash-in/cash-out), and digital devices, enabling real-time transactions.
Enabler of Financial Inclusion (Khera et al., 2021): Digital finance is seen as a means of
reducing the gender gap and providing access to underserved populations in low-income
economies.
Digital financial services (DFS) are financial services that are accessed and delivered through
digital channels. Ebong and George (2021) DFS include e-money, digital wallets and
payment platforms, loans, saving, insurance, and investment. The proliferation of Mobile
money and technology innovations in bank has significantly transformed traditional banking
services, expanding opportunities for unbanked individuals and marginalized groups,
including women encounter challenges accessing financial services due to lower literacy,
digital exclusion, and limited technology access
Types of digital financial services
[Link] Payments And Wallets
. Mobile Money: This are services often provided by mobile network operators, allowing
users to store, send and receive money via mobile phones
. Digital Wallets: These are applications like Apple, Pay, Google Pay, PayPal that store
payment information and facilitate online and in-store transactions
. Online Payment Gateways: Services enabling e-commerce transactions.
. Cross-border Remittances: Digital platforms facilitating international money transfers at
lower costs
. Instant Payment Systems: Real-times interbank payment systems
Automated Taller Machines: This is an electronic telecommunication device that enables
customers of financial institutions to perform various financial transactions such as cash
withdrawal, deposits, transfers or balance inquiries without the need for a human bank teller
or branch representative.

2.1.3 Concept of financial performance

Financial performance is a measure of an organization's ability to use its assets to generate
revenues. The process is essential for the sustainability of any organization. It can also be
described as the organizations actual output as measured against its intended output.
According to Zahra (1993), organizational financial performance measurement is the process
of obtaining and analyzing an organization’s financial information. Financial performance
measurement entails studying the process to determine whether the actual output is in line
with what ought to be accomplished. There are various indicators of indicators, and they
include; operating cash flow, working capital, and current ration, debt to equity ratio,
inventory turnover, accounts payable and receivable turnover and return of equity. Previous
studies have often used return on assets, return on investments and cash flow as a measure of
an organization’s financial performance (Azar & Ciabuschi, 2017). According to Kim,
Watkins and Lu (2017), an organization survival positively correlates with its financial
performance measures. Several measures including strategic planning and a balanced
scorecard are used by organizations to align their activities with its strategy, monitor its
performance against strategic goals and improve both its internal and external
communications. Finance is at the core of any business or organization’s survival. Financial
performance is defined as the level of organizational accomplishments in terms of profits and
losses over a specified period. strategies in objective monetary terms. Finance ensures the
smooth running of an organization and informs its decisions and actions. Organizations
cannot achieve their objectives without focusing on its financial performance; therefore, they
are often focused on the management of corporate resources in an external environment that
is continuously putting pressure on them (Zink, 2017).Performance measurement systems
determine the measurements of organizational performance as efficiency in financial
performance and quality return. Other organizational performance measures include cost
reduction, customer satisfaction, and asset utilization. Organizations often face a rapidly
changing environment which can be interpreted into multifaceted, complex and interlinked
initiatives. The changes in the external environmental factors affect organizational designs,
work, and resource allocations; therefore, resulting in variations in financial performance.
Chunget al. (2016) attributes political interference and economic situations variations to poor
organization financial performance. Kribikova (2016) argue that even with an adequately
formulated strategy, changes in the external environmental factors impact the organizations'
financial performance. According to Kim, Watkins & Lu, Z. (2017), financial performance is
to some extent, predicted by the external environment manifestations. External environmental
changes may be favourable or unfavourable towards the organization’s performance. High
financial performance is achieved when the organization's responsiveness towards its strategy
remains an essential aspect of its strategic management. Therefore, it can be stated that
external environmental factors impact organizational performance.
Key indicators of financial performance
-Profitability: The company’s ability to generate profit relatively to its revenue operating
cost, or assets. This include; gross profit margin, return on assets(ROA) and return on equity
(ROE)
- liquidity: the company’s ability to meet its short-term financial obligations. (current ratio
and quick ratio)
-Solvency: the company’s ability to meet its long-term financial obligations and continue
operation in a long run. (The debt-equity ratio and debt –asset ratio)
- Efficiency or asset utilization: this is how efficiently company’s use their assets to generate
sales (inventory turnover)
2.2. Empirical Literature
This section reviews what other writers and researchers have discovered on similar studies
Using technology to transform traditional banking operations, improve customer experience,
and promote financial inclusion, digital banking has transformed the financial sector by
bridging
convenience and innovation. This shift from physical branches to digital-first models
highlights how modern banks compete in an increasingly digital economy. According to
Ngamal and Perajaka (2022), their study examines global and Indonesian-specific
developments in the banking sector's usage of digital technology. According to this report,
the global financial ecosystem is changing quickly as a result of the use of digital
technologies or digitalization. This is taking place because of the public's growing desire for
digital services. This creates opportunities for the banking sector to grow both its clientele
and earnings. However, there are other avenues through which financial institutions may
suffer losses because of the growing number of cybercrimes. According to Maulidya and
Afifah (2021), digital transformation is a significant shift in how banks and other financial
organizations learn about engaging with and pleasing clients. This goes beyond merely
switching from traditional banking to the digital realm. Insight into digital consumer
behavior, preferences, likes, and dislikes is the first step in digital transformation. This insight
leads to significant organizational changes, such as a shift from a product-centric to a
customer-centric approach. In this digital age, banking needs can arise at any time and
location. Therefore, banks must be innovative, resilient, safe, optimized, and prepared to
satisfy the demands of tech-savvy clients. Customers are prepared to switch banks to one that
better suits their demands if banks fail to satisfy them. The study conducted by Vally and
Divya (2018) examines how clients use digital payment options. The major source of data
used in this study was collected from 183 people in Hyderabad. The data collected via
surveys were examined using chi-square analysis. The use of technology for digital payments
has improved the banking sector's performance and brought it closer to achieving the
objective of a cashless society according to the poll. Digital banking systems have an
enormous potential to change the financial environment. The study found that the low cost
and ease of use of digital banking might speed up the adoption of the cashless economy. To
enhance customer experience, banks are continuously working to integrate state-of-the-art
technology (Golden S, 2017; Paria & Giri, 2018; Shettar & Sheshgiri, 2019). According to
Kitsios, Giatsidis, and Kamariotou (2021), banks should adapt their business strategies to
manage middle and back-office processes, engage with consumers differently, remain
competitive, and be ready for the future. The global use of mobile devices and the Internet
has led to the emergence of new banking and financial payment systems. Digital banking has
emerged as a state-of-the-art, useful, and efficient way to conduct financial transactions.
Mobile wallets, online banking, Internet banking, and electronic banking are only a few of
the many forms of digital banking that are currently accessible (Alkhowaiter 2020). The
proliferation of mobile devices is another important driver of digital change. According to
Skinner (2014), the average global mobile phone usage rate is 70%, which provides the
groundwork for the creation of new mobile applications. This is supported by a study of
customers in 22 countries, which found that while the usage of internet banking services has
essentially remained the same, the use of mobile banking applications has grown by 19%
between 2013 and 2014 ([Link], 2014; Payne, Dahl, & Peltier, 2021). Satisfaction,
motivation, trust, self-efficacy, and habits are critical factors in determining the intention to
use Internet banking in Pakistan, according to Sharif and Raza (2017). According to the
study's findings, the authors emphasized the significance of enhancing users' proficiency with
online banking as well as the necessity of updating online banking applications and including
a more creative user interface to encourage more users to utilize online banking (Koroleva &
Kudryavtseva, 2019). Another study revealed that design and dependability have an impact
on both loyalty and satisfaction, whereas privacy and security only have an impact on loyalty.
Assistance and customer service had no discernible impact on either result. This study
highlights important aspects of service quality that affect e-banking experiences during the
pandemic (Indrasari, Nadjmie, & Endri, 2022). As new digital ecosystems emerge, banks are
able to create new business models and realign themselves within the financial value chain,
as well as other value chains. Collaborations with other cutting-edge service providers,
including investing platforms, and the creation of fintech services are two examples (Udin,
2023; Yazid, Zainol, & Bakar, 2023). The increasing volume of digital data enables banks
toobtain a more comprehensive understanding of their clientele and provide them with new
services, such as value chain optimization services tailored to business clients based on rating
history. Despite the rapid growth of the literature on digital banking, no thorough
investigation of the impact and ways in which digital banking is altering the face of
contemporary banks in Bangladesh has been conducted. The goal of the current study is to
close this gap and offer recommendations for the nation's further advancement in digital
banking.

Digital Financial Services has attracted the attention of academic scholars covering a wide
range of topics. For instance, Shaikh et al., (2020) examined the key drivers of customer
experience with non-financial digital services and revealed that consumer awareness, ease of
use and usefulness largely affects the experience and usage of mobile banking applications.
Niemand et al., (2021)’ study on digitalization in the financial industry revealed that having a
clear vision on digitalization a willingness to take risks and no just a sheer level of
digitalization affects the profitability of banks. Additionally, Opiyo (2021) explored the effect
digital financial services on financial performance using descriptive and correlation analysis
found a strong and significant positive correlation between mobile financial services and
financial performance while online financial services had a moderate and significant positive
correlation between mobile financial services and financial performance. Beloke et al., (2021)
analyzed the influence of digital financial services on the financial performance of banks in
Cameroon. The study used the Taylor linearise variance estimation method. The study
revealed that digital withdrawals, digital saving services and digital transfer services had a
positive and significant influence on the profitability of banks. Interestingly, the study found
a negative but significant influence of digital payments and the profitability of banks.
Wadesango & Magaya (2020) analyzed the impact of digital banking services on
performance of Commercial banks in Zimbabwe. The study used multiple regression model
and performance was measured using the Return on Assets (ROA) ratio. The study revealed
that there was a positive relationship between Return on Assets and digital banking. An
increase in online customer deposits and online banking transactions led to an increase in the
Return on Assets. However, the study also found a negative relationship between Return on
Assets, internet banking fees and commissions and expenditure on internet banking. Too et
al. (2016) and Oyomo (2018) studies revealed a significant relationship between mobile
banking and the performance of Commercial banks. While Mateka & Omagwa (2016), study
revealed a positive influence of internet banking on bank incomes, operating costs, loan book
and customer deposits. Tunay et al., (2015) found a strong relationship between internet
banking and performance of banks in the Euro area countries and Dinh et al., (2015) study
revealed that internet banking had an impact on the profitability of banks. However,
Giordani, et al., (2013) found that using the internet as a delivery channel of financial
services has no effect on the profitability of banks in terms of Return on Assets (ROA) and
Return on Equity (ROE). The study concluded that the adoption internet banking has not
impact on net loans over assets, assets and equities over total assets. Takon et al., (2019)
analyzed the impact of digital payments system of the efficiency of banks in Nigeria. The
study revealed that digital payments (Point-of sale, ATM transactions, mobile payment and
web payment) had a negative and significant impact of the efficiency of banks. Boateng &
Nagaraju (2020) study investigated the impact of digital banking on the profitability of
deposit money banks in Ghana. The study there was a positive relationship between Ghana
automated clearing house, Ghana interbank settlement, GH-Link and the profitability of
Banks. However, the study also found a negative relationship between mobile money, E-
zwich and the profitability of banks

In recent years, the African continent has experienced a profound transformation in its
financial landscape, driven by the rapid adoption and integration of digital banking solutions.
Digital banking, encompassing a spectrum of services from mobile money platforms to
online banking applications, has emerged as a key driver of financial inclusion, economic
growth, and technological advancement across Africa (Pazarbasioglu ET AL., 2020). This
transformative shift has not only enhanced accessibility to financial services but has also
catalyzed entrepreneurial opportunities, improved financial literacy, and fostered a sense of
economic empowerment among diverse communities. The significance of recent
developments in digital banking lies in their pivotal role in shaping the contemporary
financial landscape of Africa. Technological innovations, coupled with a burgeoning youth
population and increased internet penetration, have propelled the adoption of advanced
financial services. The proliferation of digital wallets, the rise of mobile money services, and
the integration of technologies like blockchain and artificial intelligence are not just trends
but integral components reshaping how individuals interact with and perceive banking
services. These developments bridge gaps, overcome traditional barriers, and contribute to
the creation of a more inclusive, efficient, and responsive financial ecosystem (Igwe et al.,
2020). The purpose of this review is to delve into the recent developments and challenges in
digital banking across the African continent. By examining the evolution of digital banking
platforms, exploring the integration of cutting-edge technologies, and critically assessing the
impact on financial services, this review aims to provide a comprehensive understanding of
the current state of digital banking in Africa. Additionally, the exploration of challenges,
including regulatory frameworks, infrastructure limitations, and cybersecurity concerns, will
shed light on the obstacles that must be addressed to ensure the sustainable growth and
effectiveness of digital banking initiatives. The landscape of digital banking in Africa has
witnessed remarkable advancements in recent years, driven by the adoption of advanced
technologies, the integration of innovative solutions, and increased internet penetration. This
review explores the dynamic developments in digital banking across the continent, focusing
on the rise of mobile money services, the proliferation of digital wallets, the expansion of
online banking platforms, the utilization of blockchain in financial services, the incorporation
of artificial intelligence for enhanced user experiences, and the impact of increased internet
penetration and mobile phone usage on accessibility to financial services. Mobile money
services have emerged as a transformative force in African economies, providing individuals
with the ability to conduct financial transactions using their mobile phones (Siano et al.,
2020). Pioneered by services like M Pesa in Kenya, mobile money has become a ubiquitous
tool for payments, money transfers, and financial inclusion. The rise of mobile money
services has significantly contributed to financial inclusion, particularly in regions where
traditional banking infrastructure is limited. Unbanked and underbanked populations now
have access to basic financial services through user-friendly mobile interfaces. The success of
mobile money services has led to their expansion across various African countries, with
telecom operators and financial institutions collaborating to create interoperable systems that
facilitate seamless transactions. The proliferation of digital wallets has created a diverse
ecosystem of platforms that enable users to store, manage, and transact digital currencies
(Jørgensen and Beck, 2022). These wallets range from those provided by traditional banks to
standalone fintech solutions. Digital wallets offer users a convenient and secure means of
conducting transactions. With features such as tokenization and biometric authentication,
these wallets prioritize both user experience and data security. The integration of digital
wallets with e-commerce platforms has facilitated online transactions, contributing to the
growth of digital commerce in Africa. Users can make purchases, pay bills, and access a
range of financial services through these digital platforms. Traditional banks and financial
institutions have expanded their online banking platforms to offer a comprehensive suite of
services. Users can now perform a wide array of financial activities, including account
management, fund transfers, and bill payments, through web-based interfaces and mobile
apps. The evolution of online banking platforms emphasizes user centric design, ensuring that
interfaces are intuitive and accessible (Sikder and Allen, 2023.). This approach enhances the
overall user experience and encourages the adoption of digital banking among diverse
demographics. Collaboration between traditional financial institutions and fintech companies
has played a pivotal role in the expansion of online banking services. Fintech innovations are
integrated into existing platforms, providing users with cutting-edge solutions. The utilization
of blockchain technology in financial services has gained traction, providing enhanced
security, transparency, and efficiency in transactions. Blockchain is particularly beneficial for
reducing fraud and ensuring the integrity of financial data. Blockchain facilitates cross-border
transactions by offering a decentralized and tamper-resistant ledger. This is particularly
valuable in regions where traditional banking infrastructure may be limited, enabling secure
and efficient international transactions (Broby, 2021). Smart contracts, powered by
blockchain, have the potential to automate financial processes, reducing the need for
intermediaries and lowering transaction costs. This can contribute to greater financial
inclusion by providing cost effective services to underserved populations. Artificial
intelligence (AI) is being increasingly integrated into digital banking to provide personalized
and predictive financial services. AI algorithms analyze user behavior, preferences, and
spending patterns to offer tailored recommendations and services (Wagner and Eidenmuller,
2019). Chatbots and virtual assistants powered by AI enhance customer interactions,
providing instant responses to queries and facilitating smoother customer experiences. These
technologies are especially valuable in addressing customer concerns and providing real-time
support. AI plays a crucial role in fraud detection and risk management. Machine learning
algorithms analyze vast datasets to identify patterns indicative of fraudulent activities,
enhancing the security of digital banking transactions. Increased internet penetration,
facilitated by the expansion of mobile networks and the availability of affordable
smartphones, has significantly improved accessibility to digital banking services. Users can
now access financial platforms from virtually anywhere. The combination of increased
internet penetration and mobile phone usage has extended the reach of financial services to
rural and remote areas. Digital banking platforms, including mobile money services, are
making financial inclusion a reality in regions that were traditionally underserved (Shaikh et
al., 2023). The tech-savvy population in urban and rural areas is driving digital adoption.
Financial education initiatives are helping users understand the benefits of digital banking,
ensuring that they can make informed decisions and utilize available services effectively.
Africa's youthful population, characterized by a high percentage of tech-savvy individuals, is
a driving force behind the adoption of digital banking. The younger generation is quick to
embrace new technologies, contributing to the widespread use of digital financial services
(Shams et al., 2020). To harness the potential of the tech-savvy population, digital literacy
programs are being implemented to ensure that individuals are equipped with the necessary
skills to navigate and utilize digital banking platforms effectively. The digital adoption trend
is not only influencing personal banking but is also fostering entrepreneurial opportunities.
Digital platforms enable the creation of fintech startups, contributing to a dynamic and
innovative financial services landscape.

[Link] Review

[Link] base view theory by Jay B-Baney

It is a strategic management framework stating that competitive advantage comes from

internal, rather than external, factors. It argues that firms achieve superior performance by
acquiring and controlling resources that are Valuable, Rare, Imperfectly Imitable, and Non-
substitutable.

There are two underlying assumptions of the RBT related to the explanation of how firm-
based resources generate sustained competitive advantage and why some organisations may
continually outperform others by gaining higher competitiveness (Helfat & Peteraf, 2003).
First, the bundles of resources owned by firms are different from each other (Helfat &
Peteraf, 2003). One of the cornerstones of RBT is the heterogeneity of resources and
capabilities in a population of firms, which differentiate the competitive advantage of each
firm. The heterogeneity of resources assumes that a firm possesses unique resources in a
specific situation can potentially be more skilled to perform particular activities and create
competitive advantage. Second, the complexities of trading resources across firms may create
persistence in differences in resources (the assumption of resource immobility).

Theory assumptions of RBT begin with the assumption that organisational characteristics are
not merely modified. The organisation needs to correct its orientation if it is to succeed and
achieve sustainable competitive advantage. The dominant paradigm in determining a
company’s profits potential, such as the view of Porter (1989), suggests that a firm’s internal
factors, such as resources and capabilities, determine a firm’s profit. The seminal work about
strategic resources by Barney (1991) became the fundamental contribution to RBT, guiding
the transformation perspective of the resource-based view into a developed theory as RBT.
However, the traditional RBT does not elaborate on why and how some firms gain a
competitive advantage in circumstances of unpredictable and rapid change (Adner & Helfat,
2003). The development of a broader RBT perspective suggests that firms can achieve
competitive advantage not only by utilising critical assets, but also by building new potential
capabilities via learning, skill acquisition and the accumulation of tangible and intangible
assets over time. The resource-based logic suggests that if valuable resources (i.e. resources
that are costly and difficult to imitate) are possessed by few firms, those firms that are able to
control these resources potentially to generate sustained competitive advantage (Barney,
1991). Hence, firms can achieve an advantage by continually recombining or reconfiguring
diverse types of resources and by creating new applications to meet market demand (Adner &
Helfat, 2003).

In RBT, resources refer to assets, business processes, capabilities, the firm’s attributes,
knowledge, information, etc. controlled by a company to comprehend and implement
strategies aiming to enhance efficiency and effectiveness (Barney, 1991). The source of firm
resources can vary, coming from both within and outside the organisation. Internal resources
are, for example, R&D capabilities, logistics, brand management, and low-cost processes
(Kozlenkova, Samaha & Palmatier, 2014); while external resources are for instance: the role
of suppliers (Lewis et al., 2010), customer demand, technology change (Li & Calantone,
1998).

Company resources can be grouped into three categories, namely physical capital resources,
human capital resources and organisational capital resources (Barney, 1991). Physical capital
resources refer to company equipment, plant, its access to raw materials, geographical
location and they include the physical technology utilised by a company. Human capital
resources encompass experience, intelligence, training, judgment, relationships, and insights
from employees, such as managers and workers in a company. Finally, organisational capital
resources refer to a company’s formal structure, the company’s formal and informal system,
which comprises planning, managing, and coordinating systems. Organisational resources
also relate to informal relations amongst divisions within a company and the relationships
between a company and its business environments.

Categorisation of company resources on RBT can also build upon two groups of tangible and
intangible assets (Barney, 1991; Molloy et al., 2011). Tangible resources refer to all the
assets, which include economic gains and visible business contributions, such as products and
commodities. (Lyons & Brennan, 2019). Intangible resources comprise all the assets
possessed by a company related to the access to capabilities and knowledge as well as
organisational, strategic, and social benefits (Keränen & Jalkala, 2013). Tangible and
intangible resources have different features in terms of deterioration of use, the ability for
simultaneous utilisation and immateriality that are only obtained by intangible resources.
Intangibles resource do not deteriorate with use, they can be used simultaneously by multiple
managers, and are difficult to exchange (e.g. business process know-how, employee skills)
(Molloy et al., 2011). On the other hand, tangible resource can deteriorate with use, may or
may not have the ability to be used simultaneously by different managers, and can be
exchanged (e.g. material goods, commodities) (Molloy et al., 2011).

The second central construct of RBT, namely capabilities, represents a subset of the
company’s non-transferable company-specific resources that aim to improve the productivity
of obtaining other resources (Makadok, 2001). Capabilities can manifest themselves in
various forms and generally consist of tangible or intangible processes and information that
help a company to create efficiency and improve its productivity (Kozlenkova, Samaha &
Palmatier, 2014). However, a new concept of dynamic capabilities was introduced by Teece
et al. (1997), which can “continuously create, extend, upgrade, protect, and keep relevant the
enterprise’s unique asset base” in a changing environment (Acedo, Barroso & Galan, 2006).
Dynamic capabilities have enriched RBT research more recently by analysing the changes in
the capabilities of addressing the rapid shifts in the organisation's environments (internal and
external). The conceptualisation of capabilities has been extended with the introduction of
dynamic capabilities, which refers to resources that can be managed not only when it comes
to modifying other resources, but also for value creation (Kozlenkova, Samaha & Palmatier,
2014; Peteraf & Barney, 2003). Such resources represent, for example, alliance capabilities,
big data deployment, and product development practices. Alliance capabilities appear to be a
crucial part in the firm’s strategies by co-operating and combining resources in the most
effective and efficient manner (Nickerson & Zenger, 2004). Product development practices
could also be an example of dynamic capabilities by creating capabilities to specialise and
practise routines to increase company performance (Adner & Helfat, 2003).
Figure 1: The framework of Resource-based Theory to generate a sustainable
competitive advantage

Based on Fig.1, the framework of RBT includes four conditions to assess whether a resource
has the potential to become and generate a sustainable competitive advantage. The four
conditions are (1) value, (2) being rare, (3) immobility and (4) sustainability (Barney, 1991).
The four terms, known as the VRIS framework, are the characteristics that a firm must have
as the strategic planning reference and hold the prospect of sustained competitive advantage.
First, the resource must be valuable, which refers to a condition that exploits the opportunities
and/or threats in a firm’s environment. For example, a company may have a secret formula to
produce a specific product that only this company has. Second, the resource must be rare, in
the sense that it is rare or unique among the firm’s current and potential competition. For
instance, a company may have the capability of a worldwide distribution network. Third, the
resource must be imperfectly imitable: the valuable and scarce resources owned by a firm
cannot be easily obtained by other firms who do not possess these resources. An example of
an imperfectly imitable condition is a globally recognised product or company brand, which
has no equivalent capability or resource that could be used by others. The fourth and final
condition is that the resources cannot be strategically duplicated or substituted, that they are
neither rare nor valuable or imperfectly imitable by other firms. An example of the non-
substitutable condition is the portfolio of popular trademarks that are legally protected,
making it a non-sustainable resource. The four conditions of RBT suggest that poor
organisational policies, processes, and procedures may weaken a resource’s potential
competitive advantage (Barney, 2007). Hence, the organisation can act as the adjustment
factor to prevent or support a firm from entirely realising the advantages of the firm's
embodied resources in its evaluability, rareness, and costliness or complexity to imitate
(Barney, 2007).

In development, the RBT framework presented in the VRIS model (valuable – rareness –
inimitable – substitutability) was later replaced by the VRIO model (valuable – rareness –
inimitability – organisation) (Barney, 1991;Barney, 2007). The VRIO model proposes the
new criteria of the organisational embeddedness of a resource. This criterion proposes that
the importance of an organisation is organised in such a way as to exploit the resource. It
replaces the resource criterion concerning substitutability is the VRIS model. The needs of
the organised organisation criterion suggest that the organisation should focus on the proper
management (e.g., organisation policies, organised procedures) to manage the valuable, rare,
and imperfectly imitable resources and obtain their full competitive potential (Barney, 2007;
Amit & Schoemaker, 1993). The new criterion of 'organisation' also means that a firm's
processes and structure play a critical role in determining the other three resource criteria of
value, rarity, and imperfect imitability that aim to enhance organisational performance
(Kozlenkova, Samaha & Palmatier, 2014). Thus, the organisation operation functions as the
adjustment factor in deciding a firm's ability to enable or prevent realising the benefits
embodied in its valuable, rare, and costly to imitate resources (Barney, 2007). The VRIO
model's introduction has acknowledged that the organisation needs to leverage resources
effectively instead of being only possessed by the organisation (Kozlenkova, Samaha &
Palmatier, 2014).

As a result, for commercial banks, investing in and successfully implementing robust digital
financial services can create such VRIN resources. A bank that develops a superior mobile
banking application, an AI-driven personalized financial advisory platform, or an efficient
blockchain-based payment system gains a unique capability that is hard for competitors to
replicate quickly. These digital resources can lead to improved operational efficiency,
enhanced customer experience, expanded market reach (e.g., to underserved segments), and
the creation of new revenue streams. By leveraging these distinct digital capabilities, the bank
can attract and retain more customers, reduce operating costs, and differentiate itself in a
crowded market, thereby directly contributing to improved profitability, market share, and
overall financial performance.

Transaction Cost Economics (TCE)

Transaction Cost Economics, primarily associated with Oliver Williamson, suggests that
firms organize their activities (e.g., internalizing them versus outsourcing them) in a way that
minimizes transaction costs. These costs include search and information costs, bargaining and
decision costs, and policing and enforcement costs associated with economic exchanges.

Connection to DFS & Financial Performance: Digital financial services are fundamentally
designed to reduce transaction costs for both banks and their customers. For banks, DFS
automates numerous processes such as customer onboarding, loan applications, payment
processing, and account management, significantly reducing the need for manual labor,
physical paperwork, and brick-and-mortar infrastructure. This leads to lower operational
expenditures, greater processing speed, and fewer errors, thereby decreasing the "policing
and enforcement costs" of traditional banking. For customers, DFS reduces the time, effort,
and often the monetary cost of accessing banking services (e.g., instant transfers, 24/7 access
from anywhere), which lowers their search and information costs. By systematically lowering
transaction costs across the value chain, banks can achieve greater operational efficiency,
increase their profit margins on services, and offer more competitive pricing, all of which
enhance their financial performance.
 2.3.2. Diffusion of innovation theory by Everett M. Rogers (1931-2004)

An innovation is any idea, practice, or object that is viewed as new by an individual or

another unit of adoption such as a firm. Innovators can be individuals, firms, clusters, social
networks, and even countries. (Meyer, 2004; Rogers, 2003) proposed five attributes of
innovation. Individuals' perceptions of these attributes determine an innovation's rate of
adoption, which shows the relative speed with which an innovation is adopted by individuals
of a social system. The five perceived attributes of innovations are:

1. Relative advantage - refers to whether an innovation is viewed as better than the idea it
supersedes.
2. Compatibility - is the degree to which an innovation is viewed as consistent with the current
values, previous experiences, and needs of prospective adopters.
3. Complexity - is whether an innovation is perceived as relatively difficult to understand and to
use.
4. Trialability - refers to the degree to which an innovation may be experimented with on a
restricted basis.
5. Observability - represents the degree to which the outcomes of an innovation are visible to
others.

Relative advantage, compatibility, trialability and observability of an innovation are

positively related to its rate of adoption (Rogers, 2003). Complexity is the only factor that is
negatively related to the rate of adoption.

Beside the perceived attributes of an innovation, other factors can also affect its rate of
adoption. They include: the (a) type of innovation-decision, (b) the nature of the
communication channels diffusing the innovation at different stages in the innovation-
decision process, (c) the nature of the social system; and (d) the change agent, each of which
are explained below.

Having an impact on the rate of adoption of innovation, the innovation-decision can be of

different types: the first type is optional innovation decisions, which refer to choices to adopt
or reject an innovation made by an individual, independent of the decisions of other
individuals of the system. The second type is collective innovation-decisions, which are
choices to adopt or reject an innovation made by consensus among the individuals of a
system. The third type is authority innovation-decisions, which are choices to adopt or reject
an innovation made by relatively few people in a system, who have power, status, or
technical experience. There is also a fourth type that includes a sequential mixture of two or
more of these three types of innovation decisions: Contingent innovation-decisions, which are
choices to adopt or reject made only after a previous innovation-decision (Rogers, 2003).
Another factor that can also have an effect on the rate of adoption of innovation is the
communication channel. This refers to the way through which messages about the innovation
are transmitted from one person to another (Chakrabarti, Feineman & Fuentevilla, 1983).
Individuals often assess an innovation not based on scientific research by experts, but through
the subjective evaluations of near peers who have adopted the innovation. Such near peers
represent a role model, whose innovation behaviour tends to be imitated by other individuals
in their system. A distinguishing aspect of diffusion is that at least some degree of heterophily
is usually present in communication about innovations. Heterophily represents the extent to
which two or more individuals are different in certain characteristics, such as beliefs,
education, and social status. The opposite of heterophily is homophily - the extent to which
two or more individuals are similar in certain traits. The level of similarity among group
members across which an innovation diffuses tends to accelerate the ease and speed with
which the diffusion occurs. For instance, innovations spread faster among homophilous
groups than among heterophilous groups (Cain, 2002).

One of the factors also impacting the rate of adoption of innovation is the social system. This
represents a set of interrelated units that are involved in joint problem solving to attain a
common objective. A system has a structure, defined as the patterned arrangements of the
units in a system, which provides stability and regularity to individual behaviour in a system.
The social and communication structure of a system facilitates or hinders the Diffusion of
Innovations in the system. In fact, the communication structure represents the differentiated
elements that can be recognised in the patterned communication flows in a system. Such a
structure includes the cliques within a system and the network interconnections among them
that are provided by ties and links. Accordingly, individuals are identified as belonging to
cliques based on the communication proximity, which means the extent to which two linked
individuals in a network have personal communication networks that overlap. A personal
network includes those interconnected individuals who are related by patterned
communication flows to a specific individual. Personal networks that are radial are more
open to an individual's environment, and, thus, play a more important role in the Diffusion of
Innovations. The information exchange potential of communication network links is
negatively related to their degree of (1) communication proximity and (2) homophily. This
generalisation represents Granovetter’s theory of “the strength-of-weak-ties”. People tend to
be linked to others who are close to them in physical distance and who are relatively
homophilous in social traits (Rogers, 2003).

Another aspect to highlight in relation to social structure is norms, the established behaviour
patterns for the members of a social system. For instance, opinion leaders (individuals who
are able to affect other individuals' attitudes or behaviour in a desired manner with relative
 frequency) conform more closely to a system's norms in comparison to their followers. When
a social system's norms favour change, opinion leaders are especially innovative.

Finally, change agents aim to affect the innovation adoption decisions of individuals in the
system in a direction considered desirable by the agent. There are 7 functions performed by
change agents: creating a need for change on the part of clients; developing an information
exchange relationship; diagnosing problems; developing an intent to change in the client;
translating intentions into action; stabilising adoption and preventing discontinuance; and
attaining a terminal relationship with clients. Change agents operate interventions, as actions
with a coherent goal to bring about behaviour change with the purpose of generating
identifiable outcomes. Targeting, which is based on customising the design and delivery of a
communication program on the basis of the characteristics of an intended audience segment,
is one way of segmenting a heterogeneous audience. Through this aforementioned approach,
customised messages that fit each individual's situation are delivered. In terms of a change
agent's relative success in ensuring the adoption of innovations by clients, it is positively
related to factors such as the extent of the change agent's effort in contacting clients, a client
orientation, rather than a change agency orientation, the level to which the diffusion program
complies with clients' needs, and increasing clients' capability to assess innovations (Rogers,
2003).

DOI represents the process through which an individual moves from first knowledge of an
innovation towards forming an attitude to it, to a decision to adopt or reject it, to
implementation of the new idea, and to confirmation of this decision. The innovation decision
process includes 5 phases (Rogers, 2003):

1. knowledge, when the individual is exposed to the innovation's presence and understands how
it works
2. persuasion, when the individual creates a favourable or unfavourable attitude towards the
innovation
3. decision, when the individual gets engaged in activities that result in a choice to adopt or
reject the innovation
4. implementation, when the individual puts an innovation to use
5. confirmation, when the individual seeks reinforcement for an innovation-decision already
made, but may reverse the decision, if exposed to conflicting messages about it.

DOI makes it possible to take a process view of the innovation adoption, moving from pre-
adoption, adoption decision, and post-adoption (Damanpour & Schneider, 2006). These
stages are usually known as intention (persuasion stage), adoption (decision stage), and
routinisation (implementation stage) (Chong & Chan, 2012; Zhu, Kraemer & Xu, 2006). The
intention stage develops the baseline for the individual to move towards the effective
adoption. In turn, the adoption results in its routinisation (Chan & Chong, 2013). In fact, as
the individual becomes more competent and learns from the experience acquired through the
intention phase to reap the advantages of the innovation effectively, they enter the adoption
stage. Once integration is complete and full-scale deployment of the innovation across the
adopter’s different activities within the system is assured, the ?nal stage, routinisation, is
reached (Martins, Oliveira & Thomas, 2016). Still, it is not always the case that an innovation
will be utilised in the long term. In some cases, there may be a discontinuance. This
represents the decision to reject an innovation after having previously adopted it. There are
two types of discontinuance: the replacement discontinuance, when an idea is rejected with
the purpose of adopting a better idea which superseded it, and the disenchantment
discontinuance, when an idea is rejected due to dissatisfaction with its performance. As such,
The financial performance of commercial banks is significantly influenced by the rate at
which their digital financial services are adopted by their target market and the broader
population. Banks that develop DFS offerings with a clear relative advantage (e.g., greater
convenience, lower fees, enhanced security) over traditional services, ensure compatibility
with existing customer behaviors, and make them simple and easy to use (low complexity)
are likely to experience faster and wider adoption. Early and widespread adoption of a bank's
DFS translates into increased customer base, higher transaction volumes, greater fee income
(from digital services), and a reduced reliance on costly physical channels. Conversely, banks
that fail to innovate or struggle with customer acceptance of their digital offerings may lose
market share to more digitally agile competitors, leading to a decline in their financial
performance.

2.3.3. Network Effect Theory by Michael L. Katz et al

Dynamic Capability (DC) Theory was initially introduced by Teece and Pisano (1994) and
further elaborated by Teece, Pisano and Shuen (1997). DC is built upon earlier concepts such
as "combinative capabilities" proposed by Kogut and Zander (Kogut & Zander, 1992) and the
idea of "routines" in the evolutionary theory of economic change. It was developed to address
the limitations of the resource based view (RBV) and continues to be explored in conjunction
with RBV in contemporary strategic management discourse (Eisenhardt & Martin, 2000).
RBV posits that a firm's sustained competitive advantage is derived from possessing
valuable, rare, inimitable, and non-substitutable (VRIN) resources. However, a significant
criticism of the RBV was its static nature, as it struggled to explain how firms could maintain
their competitive edge in rapidly changing and turbulent environments. In such dynamic
landscapes, merely owning resources is insufficient; firms need the ability to adapt,
reconfigure, and renew their resource base (Teece, 2007). DC theory was developed precisely
to address this gap by focusing on how organisations can continuously integrate, build, and
reconfigure internal and external competencies to respond to environmental shifts (Zahra,
Sapienza & Davidsson, 2006).

Over time, the literature has evolved to deepen the understanding of DC. Early work defined
DC as higher-order capabilities that enable firms to modify their operational routines (Teece,
Pisano & Shuen, 1997). More recent research has significantly delved into the micro-
foundations of dynamic capabilities, examining the specific individual actions, mechanisms,
organisational processes, and structures that underpin core DC concepts: sensing, seizing, and
transforming activities (Danneels, 2016). This has led to a more granular understanding of
how these capabilities are built and enacted in various contexts, including digitalisation and
sustainability (Bağış et al., 2025).

Dynamic capability theory is centred on a firm's ability to purposefully adapt, renew, and
reconfigure its resource base to achieve sustained competitive advantage in volatile
environments (Teece, Pisano & Shuen, 1997). Dynamic capabilities operate as higher-order
capabilities that govern the evolution and reconfiguration of ordinary or operational
capabilities (Schriber & Löwstedt, 2020). Table 1 provides definitions of ordinary capabiliy
and dynamic capability. Specifically, dynamic capabilities facilitate the balance between the
exploitation of existing competencies and the exploration of new opportunities. This is a
critical factor for sustained organisational performance in dynamic markets (Zahra, Sapienza
& Davidsson, 2006; Benner & Tushman, 2003). Organisations endowed with robust dynamic
capabilities can not only manage uncertainty and complexity effectively, but also proactively
shape their competitive landscape, thus securing long-term organisational success and
adaptability in the innovation-driven economy.

Conclusively, In the rapidly evolving digital landscape, simply having static digital resources
is often insufficient. Commercial banks need dynamic capabilities to continuously adapt their
digital financial services. This means having the capacity to: (1) Sense emerging digital
technologies, shifting customer demands for DFS, and competitive moves from fintechs; (2)
Seize opportunities by rapidly developing and deploying new digital products, forming
strategic partnerships, or acquiring relevant technologies; and (3) Transform their
organizational structure, culture, and processes to support ongoing digital innovation and
change. Banks with strong dynamic capabilities in DFS are better equipped to anticipate and
respond to market disruptions, maintain technological relevance, and continuously enhance
their digital offerings. This continuous adaptation and innovation ensure sustained customer
engagement, optimize cost structures, and ultimately lead to superior and sustained financial
performance in a highly competitive digital environment