Digital Transformation and Profitability of Deposit Money Banks in South-South Region of Nigeria

Abstract

This study empirically looks at the relationship between digital transformation and profitability of Deposit Money Banks (DMBs) in South-South region of Nigeria. The study adopted a cross-sectional research design, with the participants of the study being 609 respondents of (DMBs) in South-South region of Nigeria. A sample size of 242 respondents was determined using Taro Yamanes formula. Data were analysed using the multivariate regression and the analysis of variance (ANOVA) techniques. The findings show that digital transformation has a significant positive impact on profitability. In this regard, the research concluded that digital transformation has an effect on profitability. The results of the hypotheses tested showed that artificial intelligence driven and digital currency do not have significant relationships with the profitability of Deposit Money Banks, as both variables recorded very high p-values. This indicates that among the three digital financial technologies examined; only open banking contributes significantly to the profitability of Deposit Money Banks, while artificial intelligence driven and digital currency do not demonstrate notable direct influence in this context.  Based on this conclusion, the study recommended that  Deposit Money Banks are to strengthen and develop their open banking initiatives because this digital innovation has proven the presence of a positive and powerful effect on profitability.  Deposit money banks should streamline their AI plans by focusing on the use cases that prove to be efficient regarding operational efficiency, fraud detection, customized services, and credit-risk evaluation. Finally, they must review their digital currency plans by raising their customer awareness, informing the customer about the advantages and threats and enhancing digital currency infrastructure to facilitate adoption.