Impact of Technological and Service Innovations in Banks: A Meta-Analysis

With market rivalry on the rise, many banks strive to obtain a competitive advantage through various types of innovation. Existing research, however, has not reached consistent results on the relationship between innovation and bank performance. As a result, the goal of this work is to give a quantitative analysis of the innovation-performance link based on existing research findings. A total of 24 peer-reviewed publications were reviewed and analyzed using a random effects model, a statistical technique well-suited for meta-analytic analysis, to examine the relationship between innovation and bank performance. The study also explored the impacts of different subgroups, focusing on technological and service innovations. The result found a significant positive association between overall innovation and different kinds of bank performance, such as profitability, income, Return on Asset (ROA), and customer satisfaction. Notably, technological innovation emerges as a key driver of bank performance, demonstrating a considerable positive impact across these performance metrics. Furthermore, specific technological innovations such as mobile banking and agent banking also significantly affect performance. Moreover, other innovations, such as product and service, positively impact bank performance. On the contrary, telephone banking, internet banking, Electronic Fund Transfer (EFT), etc., did not significantly affect bank performance. Overall, the findings of the meta-analysis underscore the importance of technological innovations, particularly data or AI-driven analytics, in enhancing banks' customer satisfaction, suggesting that banks should prioritize these advancements to achieve a greater competitive advantage.