Relationship between digital transformation and business performance of selected South African banks

dc.contributor.authorOkkers, John-Paul
dc.descriptionA research report submitted in partial fulfilment of the requirements for the degree of Master of Management in Digital Business to the Faculty of Commerce, Law and Management, Wits Business School, University of the Witwatersrand, Johannesburg, 2020
dc.description.abstractSouth African-based banks are committed to succeeding in the never-ending race towards Digital Transformation, driven by the ever-changing needs of customers. During the current time, digital maturity is a key indicator of Digital Transformation, with customer-centric business models, and increased profits amongst the toptrending focus areas of Digital Transformation in banking. The conundrum facing the South African banking industry, is the complexity presented by attempting Digital Transformation during a period when the rate of customer needs and technology change is increasing at an unpredictable pace, compounded by the impact of the Coronavirus disease of 2019 (COVID-19) outbreak. Digital Transformation remains unchartered territory, and with apparent gaps and flaws existing in current research on Digital Transformation of the South African banking industry. This study recognizes Digital Transformation as an area that exhibits continuous change, because of the race towards maximum profit-extraction from everchanging consumer needs and the use of technology is to radically improve the performance or reach of enterprises (Westerman, G., Bonnet, D., and McAfee, A., 2014). This study addresses gaps in current research on Digital Transformation in the South African Banking industry, using academic research methods, empirical evidence and fundamental data analysis to explore relationships between Digital Transformation and Business Performance of selected South African-based banks. Drawing from existing literature on Digital Transformation and accounting measures of Business Performance, relevant to the Business Performance indicators specified by Westerman, G., et al. (2014), specific to Banking this study focusses on Business Performance indicators that are common across the financial statements published by the South African-based banks who took part in the study, namely: Capital Adequacy ratio (CAR), Cost-to-Income ratio (CTIR), 3 Credit Loss ratio (CLR), Earnings Before Interest and Tax margin (EBITM), Fixed Asset Turnover ratio (FATR), Net Profit margin (NPM), Revenue per Employee ratio (RER), Return on Assets (RoA), Return on Equity (RoE). The study is based upon the Westerman’s Leading Digital Framework (see Appendix - I and Appendix – J) as it features direct evidence of links between Digital maturity and Business Performance, alluding to higher levels of Business Performance and profitability being achieved through the progression of Digital maturity. The unit of analysis for this exploratory study was the South African Banking industry, the sample within this is the individual Banks. The exhaustive approach towards statistical analysis presented challenges as the data analysis was performed with only 3 banks taking part in the study, this implies that although there were 29 responses, 14 for Bank A, 5 for Bank B and 10 for bank C, the sample was 3 as the unit of analysis was a bank. This is because CAR, CTIR, CLR, EBITM, FATR, NPM, RER, RoA and RoE, was only per bank and hence the analysis could not be done per survey respondent. On the basis that parametric analysis techniques generally requires a minimum of 30 samples, the study used non-parametric analysis techniques to explore for relationships and correlations. The analysis revealed that Digital maturity had a relatively weak and an insignificant impact on Business Performance. Thus the outcome of the study suggests that Business Performance as measured by CAR, CTIR, CLR, EBITM, FATR, NPM, RER, RoA and RoE cannot be used as a proxy for Digital Maturity in Banking overall, and further academic research is required to produce conclusive evidence on relationships between Digital Transformation and Business Performance.
dc.description.librarianTL (2023)
dc.facultyFaculty of Commerce, Law and Management
dc.rights.holderUniversity of the Witswatersrand, Johannesburg
dc.schoolWits Business School
dc.subjectDigital transformation
dc.subjectDigital maturity
dc.subject.otherSDG-8: Decent work and economic growth
dc.titleRelationship between digital transformation and business performance of selected South African banks
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