The digital trasformation in the Italian banking sector

Using a unique dataset based on the results of a survey of almost 280 Italian banks (Regional Bank Lending Survey), this paper presents early evidence on the digital transformation of the Italian banking sector over the period 2007-2018. By building a composite indicator that measures the digital supply of financial services, we show a growth in digitalization over the entire period, with a clear acceleration since 2013. The adoption of digital technologies is not homogeneous across banks and, to an even greater extent, business areas: digitalization started in payment services at the end of the 1990s and then spread to asset management, whereas the use of digital channels in lending is still less frequent. More recently, banks have also implemented new FinTech projects, mainly for digital payments and asset management activities. Lastly, we find a positive correlation between the intensity of technological innovation and bank profitability, and a negative correlation with the number of branches, signalling a potential substitution effect between physical and digital channels