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How are digital finance, cyber security, and national uncertainty reshaping banks in emerging economies? This study examines the nexus between the digital finance ecosystem, cyber security, and banking sector performance across emerging economies from 1995 to 2022. Using the Autoregressive Distributed Lag (ARDL) model as the baseline and Dynamic Ordinary Least Squares (DOLS) for robustness, the study measures the digital finance ecosystem through ATMs, point of sale terminals, internet banking, mobile money, and mobile payments, while banking performance is captured by bank return on assets and return on equity.
The findings show that all digital finance indicators have a positive and significant effect on both bank ROA and ROE. After controlling for cyber security, financial literacy, financial deepening, institutional quality, and macroeconomic volatility, the results reveal mixed but significant impacts on banking performance. The DOLS robustness checks confirm these findings, reinforcing the strong role of digital finance in driving bank profitability.
The study concludes that improving digital finance infrastructure, expanding financial inclusion, strengthening fintech, internet banking, mobile money, and digital payment systems in countries like Nigeria and Kenya is critical to boosting banking sector performance. It also highlights the need to balance digital growth with investments in cyber security and institutional quality to manage risks in an increasingly digital financial landsc
ape.
