Digital Financial Services and Financial Performance: Empirical Evidence from Private Commercial Banks in Ethiopia

Darara Anbesa Balami; Dilgasa Bedada Gonfa

doi:doi:10.11648/j.iecon.20260101.15

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Digital Financial Services and Financial Performance: Empirical Evidence from Private Commercial Banks in Ethiopia

Darara Anbesa Balami^*, Dilgasa Bedada Gonfa

Published in Innovation Economics (Volume 1, Issue 1)

Received: 3 February 2026 Accepted: 26 February 2026 Published: 14 March 2026

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Abstract

This study examines the effect of digital financial services on the financial performance of private banks in Ethiopia from 2015 to 2024, analyzing internet banking, mobile banking, ATMs, POS terminals, bank size, and liquidity as independent variables. Using a quantitative explanatory design, secondary data were collected from six private banks via the National Bank of Ethiopia and bank websites, with financial performance measured by Return on Assets. Panel data analysis employing a random effects regression model in Stata 18 reveals that bank size and liquidity have a positive and significant impact on financial performance. However, internet banking shows a negative and significant effect, while mobile banking users and POS terminals exhibit negative but insignificant relationships, and ATM terminals demonstrate a positive but insignificant effect. These mixed findings indicate that although digital financial services are increasingly adopted, their contribution to bank profitability remains context-dependent. The study recommends that Ethiopian private banks strengthen liquidity management through high-quality liquid assets and pursue expansion via mergers, acquisitions, and geographic diversification into underserved areas. Policymakers, including the National Bank of Ethiopia and the Ministry of Finance, are encouraged to support strategic initiatives that foster innovation and sustainable growth within the banking sector.

Published in	Innovation Economics (Volume 1, Issue 1)
DOI	10.11648/j.iecon.20260101.15
Page(s)	45-55
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2026. Published by Science Publishing Group

Keywords

Digital Financial Services, Financial Performance, Private Banks, Return on Assets, Ethiopia

References

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APA Style

Balami, D. A., Gonfa, D. B. (2026). Digital Financial Services and Financial Performance: Empirical Evidence from Private Commercial Banks in Ethiopia. Innovation Economics, 1(1), 45-55. https://doi.org/10.11648/j.iecon.20260101.15

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ACS Style

Balami, D. A.; Gonfa, D. B. Digital Financial Services and Financial Performance: Empirical Evidence from Private Commercial Banks in Ethiopia. Innov. Econ. 2026, 1(1), 45-55. doi: 10.11648/j.iecon.20260101.15

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AMA Style

Balami DA, Gonfa DB. Digital Financial Services and Financial Performance: Empirical Evidence from Private Commercial Banks in Ethiopia. Innov Econ. 2026;1(1):45-55. doi: 10.11648/j.iecon.20260101.15

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@article{10.11648/j.iecon.20260101.15,
  author = {Darara Anbesa Balami and Dilgasa Bedada Gonfa},
  title = {Digital Financial Services and Financial Performance: Empirical Evidence from Private Commercial Banks in Ethiopia},
  journal = {Innovation Economics},
  volume = {1},
  number = {1},
  pages = {45-55},
  doi = {10.11648/j.iecon.20260101.15},
  url = {https://doi.org/10.11648/j.iecon.20260101.15},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.iecon.20260101.15},
  abstract = {This study examines the effect of digital financial services on the financial performance of private banks in Ethiopia from 2015 to 2024, analyzing internet banking, mobile banking, ATMs, POS terminals, bank size, and liquidity as independent variables. Using a quantitative explanatory design, secondary data were collected from six private banks via the National Bank of Ethiopia and bank websites, with financial performance measured by Return on Assets. Panel data analysis employing a random effects regression model in Stata 18 reveals that bank size and liquidity have a positive and significant impact on financial performance. However, internet banking shows a negative and significant effect, while mobile banking users and POS terminals exhibit negative but insignificant relationships, and ATM terminals demonstrate a positive but insignificant effect. These mixed findings indicate that although digital financial services are increasingly adopted, their contribution to bank profitability remains context-dependent. The study recommends that Ethiopian private banks strengthen liquidity management through high-quality liquid assets and pursue expansion via mergers, acquisitions, and geographic diversification into underserved areas. Policymakers, including the National Bank of Ethiopia and the Ministry of Finance, are encouraged to support strategic initiatives that foster innovation and sustainable growth within the banking sector.},
 year = {2026}
}

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TY  - JOUR
T1  - Digital Financial Services and Financial Performance: Empirical Evidence from Private Commercial Banks in Ethiopia
AU  - Darara Anbesa Balami
AU  - Dilgasa Bedada Gonfa
Y1  - 2026/03/14
PY  - 2026
N1  - https://doi.org/10.11648/j.iecon.20260101.15
DO  - 10.11648/j.iecon.20260101.15
T2  - Innovation Economics
JF  - Innovation Economics
JO  - Innovation Economics
SP  - 45
EP  - 55
PB  - Science Publishing Group
UR  - https://doi.org/10.11648/j.iecon.20260101.15
AB  - This study examines the effect of digital financial services on the financial performance of private banks in Ethiopia from 2015 to 2024, analyzing internet banking, mobile banking, ATMs, POS terminals, bank size, and liquidity as independent variables. Using a quantitative explanatory design, secondary data were collected from six private banks via the National Bank of Ethiopia and bank websites, with financial performance measured by Return on Assets. Panel data analysis employing a random effects regression model in Stata 18 reveals that bank size and liquidity have a positive and significant impact on financial performance. However, internet banking shows a negative and significant effect, while mobile banking users and POS terminals exhibit negative but insignificant relationships, and ATM terminals demonstrate a positive but insignificant effect. These mixed findings indicate that although digital financial services are increasingly adopted, their contribution to bank profitability remains context-dependent. The study recommends that Ethiopian private banks strengthen liquidity management through high-quality liquid assets and pursue expansion via mergers, acquisitions, and geographic diversification into underserved areas. Policymakers, including the National Bank of Ethiopia and the Ministry of Finance, are encouraged to support strategic initiatives that foster innovation and sustainable growth within the banking sector.
VL  - 1
IS  - 1
ER  -

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Author Information

Darara Anbesa Balami

Department of Accounting and Finance, Bule Hora University, Ethiopia

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Dilgasa Bedada Gonfa

Department of Accounting and Finance, Bule Hora University, Ethiopia

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APA Style

Balami, D. A., Gonfa, D. B. (2026). Digital Financial Services and Financial Performance: Empirical Evidence from Private Commercial Banks in Ethiopia. Innovation Economics, 1(1), 45-55. https://doi.org/10.11648/j.iecon.20260101.15

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Balami, D. A.; Gonfa, D. B. Digital Financial Services and Financial Performance: Empirical Evidence from Private Commercial Banks in Ethiopia. Innov. Econ. 2026, 1(1), 45-55. doi: 10.11648/j.iecon.20260101.15

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AMA Style

Balami DA, Gonfa DB. Digital Financial Services and Financial Performance: Empirical Evidence from Private Commercial Banks in Ethiopia. Innov Econ. 2026;1(1):45-55. doi: 10.11648/j.iecon.20260101.15

Copy | Download

@article{10.11648/j.iecon.20260101.15,
  author = {Darara Anbesa Balami and Dilgasa Bedada Gonfa},
  title = {Digital Financial Services and Financial Performance: Empirical Evidence from Private Commercial Banks in Ethiopia},
  journal = {Innovation Economics},
  volume = {1},
  number = {1},
  pages = {45-55},
  doi = {10.11648/j.iecon.20260101.15},
  url = {https://doi.org/10.11648/j.iecon.20260101.15},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.iecon.20260101.15},
  abstract = {This study examines the effect of digital financial services on the financial performance of private banks in Ethiopia from 2015 to 2024, analyzing internet banking, mobile banking, ATMs, POS terminals, bank size, and liquidity as independent variables. Using a quantitative explanatory design, secondary data were collected from six private banks via the National Bank of Ethiopia and bank websites, with financial performance measured by Return on Assets. Panel data analysis employing a random effects regression model in Stata 18 reveals that bank size and liquidity have a positive and significant impact on financial performance. However, internet banking shows a negative and significant effect, while mobile banking users and POS terminals exhibit negative but insignificant relationships, and ATM terminals demonstrate a positive but insignificant effect. These mixed findings indicate that although digital financial services are increasingly adopted, their contribution to bank profitability remains context-dependent. The study recommends that Ethiopian private banks strengthen liquidity management through high-quality liquid assets and pursue expansion via mergers, acquisitions, and geographic diversification into underserved areas. Policymakers, including the National Bank of Ethiopia and the Ministry of Finance, are encouraged to support strategic initiatives that foster innovation and sustainable growth within the banking sector.},
 year = {2026}
}

Copy | Download

TY  - JOUR
T1  - Digital Financial Services and Financial Performance: Empirical Evidence from Private Commercial Banks in Ethiopia
AU  - Darara Anbesa Balami
AU  - Dilgasa Bedada Gonfa
Y1  - 2026/03/14
PY  - 2026
N1  - https://doi.org/10.11648/j.iecon.20260101.15
DO  - 10.11648/j.iecon.20260101.15
T2  - Innovation Economics
JF  - Innovation Economics
JO  - Innovation Economics
SP  - 45
EP  - 55
PB  - Science Publishing Group
UR  - https://doi.org/10.11648/j.iecon.20260101.15
AB  - This study examines the effect of digital financial services on the financial performance of private banks in Ethiopia from 2015 to 2024, analyzing internet banking, mobile banking, ATMs, POS terminals, bank size, and liquidity as independent variables. Using a quantitative explanatory design, secondary data were collected from six private banks via the National Bank of Ethiopia and bank websites, with financial performance measured by Return on Assets. Panel data analysis employing a random effects regression model in Stata 18 reveals that bank size and liquidity have a positive and significant impact on financial performance. However, internet banking shows a negative and significant effect, while mobile banking users and POS terminals exhibit negative but insignificant relationships, and ATM terminals demonstrate a positive but insignificant effect. These mixed findings indicate that although digital financial services are increasingly adopted, their contribution to bank profitability remains context-dependent. The study recommends that Ethiopian private banks strengthen liquidity management through high-quality liquid assets and pursue expansion via mergers, acquisitions, and geographic diversification into underserved areas. Policymakers, including the National Bank of Ethiopia and the Ministry of Finance, are encouraged to support strategic initiatives that foster innovation and sustainable growth within the banking sector.
VL  - 1
IS  - 1
ER  -

Copy | Download