Digital banking in crisis times: evidence from Swedish banks during the COVID-19 pandemic

Kave Edin

Journal of Economic Studies, 2025, vol. 52, issue 9, 274-288

Abstract: PurposeThis study examines the impact of digital banking adoption and the COVID-19 crisis on the profitability of Swedish banks, testing whether digital banking mitigated the pandemic’s adverse effects.Design/methodology/approachUsing a panel dataset of Swedish banks, the study employs ordinary least squares, fixed effects (FE) and feasible generalized least squares (FGLS) models to analyze the effects of digital banking and the COVID-19 crisis on banks’ profitability. It further evaluates digital banking’s moderating role during the COVID-19 crisis.FindingsDigital banking exhibits a modest positive association with profitability, though its economic magnitude is marginal. The COVID-19 crisis has had no significant direct impact, and digital banking does not mitigate pandemic-related profitability shocks. Moreover, past profitability and capital adequacy emerge as robust predictors of profitability.Practical implicationsThese insights inform strategies for balancing technological innovation with financial stability in turbulent economies. Banks operating in advanced digital economies, like Sweden, may prioritize factors such as capital adequacy and persistent profitability during crisis times, while digitalization should be treated as part of a broader strategy rather than a single profit generator.Originality/valueThis study contributes to the literature by examining the interplay between digital banking and the COVID-19 crisis in the unique context of Sweden, offering new insights into the role of digitalization in crisis resilience and challenging prior findings on the protective effect of digital banking during economic downturns. By triangulating results across multiple estimators, the study advances methodological rigor in profitability studies, highlighting the resilience of traditional bank fundamentals over digitalization during systemic shocks.

Keywords: Digital banking; COVID crisis; Bank profitability; Crisis management; Sweden (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jespps:jes-04-2025-0292

DOI: 10.1108/JES-04-2025-0292

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