Digital Innovation and Bank Profitability: A Literature Review

Abstract

This study aims to analyze the relationship between digital innovation and bank profitability through a literature review of scholarly publications from the last five years. The research focuses on digital banking and mobile banking as forms of financial innovation influencing operational efficiency, financial performance, and competitiveness in the banking industry. The findings reveal that digital innovation generally improves cost efficiency, service accessibility, and transaction speed. However, its short-term impact on profitability remains varied across countries and types of financial institutions. These differences are influenced by infrastructure readiness, implementation costs, digital literacy levels, and control variables such as bank size, credit risk, and non-interest income. The study emphasizes the importance of a sustainable and adaptive digital transformation strategy to optimize the economic benefits of banking digitalization. The results are expected to provide a conceptual foundation for further empirical research and inform strategic banking policy development in the era of global digital transformation.