"Quantifying Digital Development in European Banks: A Novel Approach to Performance Analysis" by Alberto Citterio

Topic

The financial industry has undergone profound digital transformation driven by technological advancements, notably accelerated by the Covid-19 pandemic. This paper examines the impact of digitalization on bank performance through the development of a novel digitalization index, using data from 279 European banks from 2017 to 2022. We find that higher IT investments and improved network efficiency enhance profitability. Additionally, digital channel development boosts performance under certain conditions. Additional analyses show that the Covid-19 pandemic, along with a country’s digital infrastructure and technological expertise, moderate these relationships, thereby shedding light on their role in shaping the profitability dynamics of digitalized banks.