The Impact Of Digitalization On The Profitability Of Commercial Banks In Ethiopia

Abstract

The main objective of this study was to investigate the impact of digitalization on the profitability of commercial banks in Ethiopia. To achieve the objective of the study, descriptive and explanatory the research design was adopted, and a mixed research approach was used with seven years of quantitative data from 2015 to 2021, and the ordinary least squares model was used. The data was collected from seven sampled commercial banks and the National Bank of Ethiopia. The fixed effect model was used to investigate digitalization variables used in this study affecting the profitability measures by return on asset (net income to total asset). The regression result of the study revealed that automated teller machine users and point of sale transactions have a positive significant impact on banks profitability, whereas automated teller machine transactions, mobile banking users, and internet banking transactions have a negative significant impact on the profitability of commercial banks. Therefore, based on the result of this study, the researcher suggested that Ethiopian commercial banks managers should emphasize training their clients on the use of digitalization through advertisements to improve their profit abilities; commercial banks in Ethiopia should ensure that system failures are kept to a minimum to reduce their influence on the financial profitability of commercial banks in Ethiopia; and commercial banks should consider commission based mobile and internet banking service transactions as they are currently doing for bill payments and other bank transfers to improve the commercial banks profitability