Abstract:
The impact of digitalization on the financial performance of a few private commercial banks in
Ethiopia was objectively investigated in this study using an explanatory design and a
quantitative research methodology. Return on equity served as the primary measure of bank
performance, while the explanatory variables included the value of transactions conducted via
Automated Teller Machines, Debit Cards, Mobile Banking, Internet Banking, and Points of Sale .
Data on these bank-specific variables and financial statements were collected from the ebanking
departments and head offices of the selected commercial banks. A multiple linear
regression model was utilized to analyze the relationship between the study variables, with data
further interpreted using descriptive and inferential statistics. The key findings confirmed that
the value of ATM transactions and mobile banking transactions had a significant and positive
effect on the financial performance of the selected private commercial banks in Ethiopia, as
measured by ROE. Both the value of ATM transactions and the number of Mobile Banking
transactions emerged as main contributors to bank profitability in Ethiopia. Conversely, the
value of Point of Sale transactions was found to have no significant effect on bank profitability in
Ethiopia. Additionally, the number of Point of Sale terminals and the value of mobile banking
transactions (this seems like a repetition based on the earlier finding, likely meant for 'Internet
Banking' or 'Debit Cards' instead, or a clarification that only the 'value' of mobile banking was
significant, not 'number of transactions' if that was another variable) were not significant or
powerful variables influencing the financial performance of commercial banks in Ethiopia. The
study recommends that banks increase investment in new e-banking channels to automate their
systems and devise strategic alliances and collaborations, as digitalization is crucial for
enhancing the profitability of Ethiopian commercial banks
