The Impact of Digital Transformation on Promoting Banking Inclusion in Saudi Banks

Abstract

The purpose of this research is to investigate how digital transformation has affected how financial institutions, specifically banks in Saudi Arabia, create their strategies. The authors of this study also provide practical recommendations to help these financial institutions (e.g. banks) improve how well their strategies produce results related to increasing access to financial resources (financial inclusion). While the Saudi Arabian banking industry has made great strides in technological advancements over the last several years through digital transformation, some banks are encountering difficulties implementing the necessary technologies for full utilization of digital technologies for various operational aspects; for example, there are poor levels of digital financial literacy, distrust of electronic transactions, and a disparity between geographical areas and their access to the internet and digital technology in the banking industry.

The researchers adopted a descriptive analytical approach in their research; that is, they surveyed a random sample of 84 employees at various financial institutions (banks) in Saudi Arabia using a questionnaire, and analysed this data using descriptive and analytical statistical procedures, including standard deviation, arithmetic mean, and simple regression analysis. The findings indicated a high level of dependence, at an average of 3.92, on digital technologies in Saudi banks, especially for customer service and information security systems. Results also indicated that there is a significant positive association between digital transformation and the strategies of financial companies (banks) in Saudi Arabia, with approximately 70% of the variance of financial company strategies being explained by digital transformation (R² = 0.699). The null hypothesis was rejected and the alternative hypothesis was accepted.

Overall, data derived from the above-noted study indicate that differing types of digital strategies exist in the two areas of performance improvement and risk management; also, there is an opportunity to develop new offerings by using advanced AI, blockchain technology and new funding/financing models through crowdfunding which creates a significant gap between basic technology (CRM and Security), and the use of advanced technology leading to transformation.

The research results highlighted statistically significant differences in job levels between senior managers and junior managers where senior managers see a greater degree of progress as compared to junior managers. The findings also highlight the valuable role that senior managers play in the successful digital transformation process, so it is recommended that financial services companies create a comprehensive long-term digital strategy, establish specialized units to promote innovation, develop an open banking model, advance the personalization of services digitally, build advanced AI-based technology security systems, and to assist with the re-training of human resources.

The research also contains several recommendations for policymakers and regulators to create new regulations that correspond with this digital world, create digital infrastructure and national security, and create education/awareness programs that foster digital financial inclusion through easier access to finance. It also contains recommendations for researchers and academicians to conduct longitudinal studies and comparative studies of the impact of specific technologies on digital transformation and to create academic curricula that keeps pace with digital advancements.

In summary, the transition of Saudi Arabia from operational digitisation to strategic digital transformation represents a significant advancement within the Financial Services Sector through changes to its business model due to an increased emphasis and on-going large scale investment of resources allocated toward digitising their operations and using technology to improve competitiveness while also addressing issues of financial inclusion for those who are currently underserved within the financial system; thus, it will be necessary to improve and continue improving the use of technology within the Financial Services Industry due to current technology limitations and the high number of customers located in underserved areas.