Navigating the Digital Transformation: The Impact of E-Banking Channels on Bank Performance in Pakistan's Evolving Financial Landscape

Abstract

E-banking is a game changer that revolutionized the financial landscape by breaking the barriers of 9 to 5 traditional physical banking. COVID-19 signifies its importance. This study examines the dynamic relationship between various e-banking channels in Pakistan and bank performance from 2006 to 2022 while controlling macroeconomic variables like GDP and inflation. Results confirmed that past performance is dominantly affecting current performance. Customer perception toward e-banking channels also shapes its relationship with bank performance. ATMs are perceived as secure, easy, and can be used 24/7 across the country, which is why the desired positive relationship is confirmed with the bank's performance. However, due to high operational and maintenance costs, security risks, and lack of customer adoption, the desired positive impact of mobile banking and e-commerce has not been realized. Banks also need to focus on customer education to improve their financial literacy, maintenance costs, operational costs, secured infrastructure, and efficient governance to protect the customers' information and hard-earned money. This will increase customer confidence in using these channels despite the associated risks.