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Digital transformation is a tool for changing business cultures, processes, and organizational viewpoints to satisfy changing market requirements that digital technologies affect (Nasiri et al., 2020). It is also the adoption of digital technologies and the substitution of nondigital processes with digital ones, leading to changes in the organization and the advent of new business models (Radziwon et al., 2021; Verhoef et al., 2021) or the amendment of existing ones (Dabrowska et al., 2019). According to Dabrowska et al. (2022), digital transformation is a socioeconomic change across organizations, individuals, societies, and ecosystems formed by the use and adoption of digital technologies. Digital technologies surpass organizational boundaries (Nakarni & Prugl, 2020) because they outline organizational value propositions and business models and can infer new organizational identities (Wessel et al., 2020).
Digital transformation is regarded as a holistic notion that includes technologies, organizational changes, and strategic changes (Matt et al., 2015). It can be seen as a process undergone by an organization to revamp its outdated approach while embracing new ways of working and thinking by using social, digital, mobile, and new technologies (Terrar, 2015). The financial sector is going through intense transformation, and digital technologies are used for payments, insurance, lending and wealth management while this process has been exacerbated by the COVID-19 pandemic (Feyen, et al., 2021).
The digital transformation of financial service systems has been accelerated by the financial technology (FinTech) organizations because of the disruptive innovations by these new market entrants that oppose the position of the mainstream financial institutions (Breibach et al., 2020). Mandela (2018) also holds the view that the emergence of FinTech companies has further disrupted and challenged traditional banks, resulting in a competitive and intensified digital transformation. The retail banks have been at the vanguard of this technological revolution distinguished by rapid implementation of digital innovation services and innovative breakthroughs altering conventional banking practice (Krasonikolakis & Tsarbopoulos, 2020).
The South African banking sector has pursued and embedded digital mechanisms such as digital wallets, blockchain, cryptocurrency, online banking, and mobile banking (Jenkin and Naude, 2018). Louw and Nieuwenhuzen (2020) point out that the traditional South African banks have commenced implementing digitization across their business models and services by presenting Internet banking services to their customers as well as access to their websites. Digitization is acclaimed as a strategic focus area for the sector, and it is one of BankSETA’s five strategic priorities (BankSETA, 2018).
The main problem in the financial sector is that not many traditional financial service providers have implemented comprehensive digitization (Groberg et al., 2016; Kelchevskaya & Shirinkina, 2019; Niemand et al., 2020). Consequently, they often offer an incomplete range of services and are thus faced with both operational and strategic barriers within the digital transformation process (Diener & Spacek, 2021). A report developed by Capgemini research institute (Capgemini, 2022), revealed that many financial services organizations are lagging in digital transformation compared with other industry sectors.