ABSTRACT
The purpose of this chapter is to examine bank attitudes toward both digital transformation and the role of digital strategy for financial performance. The latter problem is analyzed using data for the Polish banking market and the methodology employed is a bank survey plus panel data model. The research questions posed are: whether digital strategy matters, whether commercial and cooperative banks (COOP) differ in their attitude to digitalization, and whether the digitally oriented bank creates value in terms of increased profitability. The panel data model aims at testing the hypothesis that the leaders of digitalization are also the leaders of efficiency, based on both quantitative and qualitative data obtained from the bank survey.
The empirical findings indicate that profitability measures were positively correlated with bank size and gross domestic product (GDP) growth, and negatively with non-performing loans (NPL) ratio and market concentration. The binary COVID-19 variable indicated a negative impact of the pandemic on bank performance, while the binary COOP variable indicated that COOP have good potential for profitability, but also for higher operating costs. As for digitalization-related variables, high technological expenditure was accompanied by better performance, as measured by a comprehensive performance index. A statistically significant and positive impact on profitability was also obtained from bank self-declared digital leadership position.
Overall, the bank survey confirmed that technological change has triggered a positive reaction for most banks, both globally and in Poland, transforming large universal “legacy” banks into more flexible, customer centric and digitally oriented financial institutions. However, as digitalization requires considerable investment, digital technology seems to benefit larger banks over-proportionally, putting smaller, COOP at a disadvantage.
