Digital Maturity Model and Success of Digital Transformation in the Banking Industry (Dissertation Sample)

USE OF DIGITAL MATURITY MODEL FOR HUMAN CAPITAL IN INVESTIGATING THE PROCESS OF ADOPTION AND POTENTIAL FOR SUCCESS OF DIGITAL TRANSFORMATION IN THE BANKING INDUSTRY IN KUWAIT
Table of Contents
TOC \h \u \z USE OF DIGITAL MATURITY MODEL FOR HUMAN CAPITAL IN INVESTIGATING THE PROCESS OF ADOPTION AND POTENTIAL FOR SUCCESS OF DIGITAL TRANSFORMATION IN THE BANKING INDUSTRY IN KUWAIT PAGEREF _Toc126103254 \h 1Table of Contents PAGEREF _Toc126103255 \h 2CHAPTER ONE: INTRODUCTION PAGEREF _Toc126103256 \h 41.1 Introduction PAGEREF _Toc126103257 \h 41.1.2 Background of the Study PAGEREF _Toc126103258 \h 41.2 Significance of the Research PAGEREF _Toc126103259 \h 61.3. Research Aims and Objectives PAGEREF _Toc126103260 \h 131.4 Proposed Methodology PAGEREF _Toc126103261 \h 141.4.1 Philosophical stance PAGEREF _Toc126103262 \h 141.5 Hypotheses PAGEREF _Toc126103263 \h 151.6 Research methods PAGEREF _Toc126103264 \h 161.6.1 Data Generation and Analysis PAGEREF _Toc126103265 \h 181.6.2 Sampling PAGEREF _Toc126103266 \h 191.7 Present Conditions in Digital Banking in Kuwait PAGEREF _Toc126103267 \h 20CHAPTER TWO: LITERATURE REVIEW PAGEREF _Toc126103268 \h 22CHAPTER THREE: METHODOLOGY PAGEREF _Toc126103269 \h 493.1 Introduction PAGEREF _Toc126103270 \h 493.2 DMMHC Framework PAGEREF _Toc126103271 \h 493.3 Hypothesis PAGEREF _Toc126103272 \h 503.4 Research Design PAGEREF _Toc126103273 \h 513.5 Population and Sampling PAGEREF _Toc126103274 \h 513.6 Data Collection PAGEREF _Toc126103275 \h 523.7 Data Analysis PAGEREF _Toc126103276 \h 523.7.1 Quantitative Data Analysis PAGEREF _Toc126103277 \h 523.7.2 Qualitative Data Analysis PAGEREF _Toc126103278 \h 533.8 Ethical Considerations PAGEREF _Toc126103279 \h 533.9 Questionnaire Design PAGEREF _Toc126103280 \h 533.9.1 Interview Questions for Management: PAGEREF _Toc126103281 \h 533.9.2 Interview Questions for Employees: PAGEREF _Toc126103282 \h 543.9.3 Qualitative research questions PAGEREF _Toc126103283 \h 543.9.4 Quantitative Research Questions PAGEREF _Toc126103284 \h 56REFERENCES PAGEREF _Toc126103285 \h 57
CHAPTER ONE: INTRODUCTION
1.1 Introduction
1.1.2 Background of the Study
The Central Bank of Kuwait (CBK) recently signaled the establishment of digital banks, showcasing the banking industry's objective to keep up with the recent digitization trends and global financial services. Over the years, CBK and the banking industry in the country have worked hard to introduce digital transformation in the banking sector with the development of internet banking, phone banking, etc. The transformation has been such that the CBK has already given the go-ahead for developing digital banking platforms over the internet (Arab Times, 3rd February 2022).
According to CBK Governor Dr. Mohammad Y. Al- Hashel, the smooth operation of the digital banks was one of CBK's top priorities. According to him, "As the banking industry transforms, new business models enable better and more accessible services to customers thanks to the immense potential of digital technology." (Arab Times, 3rd February 2022). The regulatory framework for digital banks was developed after analyzing case studies of 25 central banks and 40 digital bank models. According to the study, the development of digital banks in a country like Kuwait will give convenience to young customers who are more accustomed to banking from any location in the country. The CBK is at a preliminary stage of developing guidelines for the digital banking sector as it is a new segment in the industry. According to the Governor, "The guidelines come in five parts covering the definition of digital banks, their legal framework, and licensed activities, as well as phases and procedures for the establishment of digital banks as per the application form available through the CBK website, www.cbk.gov.kw, and the supervisory and regulatory instructions and controls, also available through the website." (Arab Times, 3rd February 2022). The CBK is in the process of receiving applications for the development of digital banks and is in the process of developing the environment for the development of the sector (Arab Times, 3rd February 2022).
Over the years, Kuwait's banking and financial center have been less aggressive than other countries in the Middle East. This can be showcased with the help of the Fintech Center Rankings of 2021 as follows:
Source: Everington, 25th March 2022
According to the table, Kuwait ranks the lowest among the GCC countries in terms of a fintech destination. However, despite the lower ranking of the country, there have been various start-ups in recent years that have tried to operate in the new environment (Everington, 25th March 2022). UAE and Saudi Arabia are the two leading countries in the region that have adopted the digital banking platform. Surveys have shown that young customers in these countries have been more open to opening digital bank accounts. The CBK and the Kuwaiti Government have looked to provide licenses to new standalone digital banks in the current year, which is expected to develop the sector to a new level (Abdulmalak, 1st September 2022).
However, the development of the digital banking platform in the country poses a question relating to the country's readiness in this context. This would require proper digital transformation and adoption infrastructure so that the banks and the customers in the country are ready for the change. The customers and the banks should be able to use the technology to the best of their abilities so that banking transactions are unhinged and uninterrupted. As has been seen from previous studies in the field, the adoption of digital transformation in banking in a region depends on the cultural ability of prospective customers to accept new developments. This should also be accentuated by the ability of the employees of the banks to generate interest among the customers and to make them aware of the advantages of the digital banking system. This would require the bank's employees to be trained and knowledgeable about the digital banking system (Kaur et al., 2021). Studies have also showcased that introducing a digital transformation in a new country's banking system falls under the disruptive innovation category and can be difficult to introduce (Ni, 2020). Therefore, it will be interesting to understand the conditions that are present in the realm of digital infrastructure in the banking system in Kuwait at present. It will also be interesting to understand how the banks are coping with the changes and how they perform in this context.
1.2 Significance of the Research
Considering Kuwait's recent foray into the digital banking world, the country's leaders must gain insight into the dynamics that drive the widespread acceptance and sustained growth of this innovative sector. It is also important to remember that the international banking sector has already gone through similar shifts and provided a road map for successful implementation. The worldwide banking industry has seen a significant transformation in recent years, driven mostly by the widespread acceptance of technology and industry participants' introduction of digital interfaces. Studies show that when businesses successfully adapt new technologies in a dynamic market, it benefits existing and potential customers. The banking sector has also taken notice of the shift, which has allowed newcomers to make their mark in a market once dominated by a select few giants. Because of technological advancements, users of the banking industry can now use these institutions' services without ever leaving their homes (Zachariadis & Ozcan, 2017).
Studies in the industry have demonstrated that the expansion of Application Programming Interfaces (API) has influenced the majority of advances in the sector. APIs were established as two-way communication methods between two different users. These application programming interfaces (APIs) were created so that the entity's services may be expanded either internally or externally. Internal communication, vital data sharing, and the cultivation of appropriate activities can all flourish within a closed API system (Zachariadis & Ozcan, 2017). Banks' offerings, which have benefited from the proliferation of digital channels and payment mechanisms like debit and credit cards, have been improved by adopting the open API system. Banks have adapted to these technological shifts by utilizing the resources provided by digital media platform firms specializing in these areas. Technology firms have swayed the banks' make-or-buy decisions due to their superior ability to carry out the required tasks. Thus, modern financial institutions have functioned as part of a circular economy, incorporating large technology firms into their value chain to maximize customer happiness (Zachariadis & Ozcan, 2017).
The study by Zachariadis & Ozcan (2017) has underlined that the adoption of digital technologies by the bank has been influenced by two basic economic theories – transaction costs and the power of networks. According to the economics of transaction costs, modern entities would look to adopt technologies not propelled by in-house human resources only when it is cost-efficient. The banks have found over the years that costs of operations have decreased to a certain extent with digital adoption, and thus, it is quite efficient even if they have to pay money to third-party companies. The power of networks, on the other hand, denotes that the reach of a service is increased when the networking of the same is done efficiently. In this case, the involvement of 3rd party companies is also needed. In this case, one of the prime examples has been the development of the ATM services of the banks. The banks have f...