This research investigates the impact of digitalization on Pakistan's banking industry from 2006 to 2020, focusing on banking efficiency, the effect of digitalization on efficiency, and efficiency convergence. Using bootstrap data envelopment analysis, the study finds an average bias-corrected overall technical efficiency of 74%, with pure technical inefficiency being the main driver. Tobit and dynamic panel data system generalized method of moments (DPDSYS-GMM) models reveal a positive impact of digitalization on efficiency. The results also show evidence of both absolute and conditional β-convergence, indicating that less efficient banks caught up with more efficient ones, with digitalization playing a significant role in this convergence process.

Ting Li Liu, Muhammad Mateen Naveed, Sohaib Mustafa, Muhammad Tahir Naveed