The Influence of Digital Banking on Consumer’s Financial Habits
Nicolo Limas and Adrianna Lizardo
2025-06-14
1 Abstract
This research dives in the growing influences of digital banking on consumer’s financial habits with respect to behavioral, psychological, and social factors that affect the adoption of digital banking platforms. As the evolution of financial technology continues, traditional banking is increasingly complemented, moreso evenly replaced by digital alternatives that includes the usage of mobile banking apps and e-wallets. This is evident due to the acceleration of the COVID-19 pandemic which also contribute to the urgent need of contactless, accessible, and efficient banking methods. Despite the numerous advantages offered by digital banking e.g. convenience, ease of access, and economic efficiency; many are still hesitant due to issues related to digital literacy, trust, and perceived social risks.
2 Introduction
The banking industry plays a vital role in the daily lives of consumers across the globe. In the early days, the main instruments of financial transactions were coins and paper currency, which evolved to the introduction of ATM, banknotes, and lending systems. Overtime, the advancements in technology have reshaped the banking concept (proquest). With the rapid growth of technology, it has led to the transition of traditional banking structures into an easier, more accessible, and faster way of using financial services by integrating digital banking into consumers’ financial habits. Moreso, digital banking is the transition of physical traditional banking services into software-based services. Digital banking offers a wide range of services, such as availing flexible savings and investment options, and offering virtual credit cards. This new branch of banking solution also enables users to fulfill their financial needs in a convenient and faster way. In addition, digital banks provide a software-based wallet that holds the user’s personal information, cash, credit, and debit cards, and vouchers similar to what a physical wallet can do (Windasari et al. 2022).
The dependence and approach of consumers’ preference on this digital banking industry lies in the psychological patterns, long-established behavior, and level of trust that they obtained in their past experiences. Some consumers quickly embrace the transformation to digitalization, while some remain hesitant due to a lack of understanding in digital literacy and concerns regarding security and data protection. This dynamic between consumer behavior and digital banking aids financial institutions and policymakers in creating a more inclusive digital banking environment and provides a user-centric approach to banking solutions. Understanding this concept encourages consumers to gain healthy financial habits, which enhances their financial inclusion, leading to a shift in a modern digital financial system (Ahmed and Talluri 2024).
The aims of the research are as follows:
- To examine how digital banking influences consumers’ financial habits.
- To explore psychological and behavioral factors that affect consumers’ habits in adapting to digitalization.
- To assess the role of digital banking in financial inclusion.
The scope of the study lies in the influence of digital banking on individual consumers with regards to their financial habits. It primarily examines their behavior in savings, spending, and budgeting in the context of using digital banking platforms i.e. mobile banking apps or mobile banking websites. Moreover, the study only focuses on customers that are already using retail banking and who have access in digital devices and internet connectivity. This study may be limited to geographical locations and only to specific region or country depending on the availability of digital banking services with internet connectivity. Moreover, the timeframe of this research would likewise focus on recent years where digital banking boomed during the 2020 pandemic onwards. This research does not include an in-depth analysis of institutional banking behavior, but it emphasizes the consumer experience, behavior, and decision-making process in the use of digital banking tools.
3 Literature Review
Digital banking is a force that fundamentally changed not only how banking services are delivered but also the way of life of customers and business-owners, especially with the shift from traditional banking to online means of banking; this technological advancement was further popularized and accelerated by the COVID-19 pandemic (Suluk 2023; Shikha and Singh 2024), as the circumstances demanded contactless transactions, and over time it then further established the adoption of digital banking not just in the Philippines but around the world.
(Windasari et al. 2022) observed that there are interconnecting factors that influence financial decisions, particularly as to why people of Gen Y and Gen Z use digital banks. The author considered eight factors in assessing the participants’ experience with digital banking. Amongst of these that causes the intention of using digital banks are the economic value, perceived ease of use, social influence, firm reputation, features, and rewards; while sales promotions and curiosity do not influence people’s usage of digital banks. In the Philippine setting, (Belmonte et al. 2024) observed similar factors regarding the use of e-wallets among Gen Y and Gen Z, which includes perceived ease of use, perceived usefulness, social influence, attractiveness of alternatives, perceived trust, social influence, perceived security, and perceived value.
The factors mentioned on the previous paragraph are also the reason as to why many people prefer online means of banking rather than traditional banking. Online banking provides more convenience, accessibility, and efficiency than traditional banking, however, traditional banking is still preferred when it comes to some aspects like customized one-to-one attention, trustworthiness, and even concerns with security (Rai 2025). (Kumar and Nagalakshimi 2025) stated as well that online banking is much preferred for its convenience but some customers still prefer traditional banks for its personalized service and reliability. As for the Philippines, (Gigante, Martin, and Marutani 2022) observed that 60.5% of banking customers within Metro Manila solely use traditional banking while only 4.4% use only digital banks and 35.1% use both digital and traditional banking. This possibly shows that most Filipinos have the strong tendency to use traditional banking, which indicates a high level of resistance in the adoption of online banking. While there are numerous recent studies showing that Filipinos prefer the use of online banks and e-wallets due to their benefits, there are not many studies showing comparisons between the preference of traditional and digital banks among Filipinos and the statistics thereof. In comparison to other countries, (Federal Reserve Financial Services 2024) states that 73% of American Gen Y and Gen Z use online means of banking, while 56% of them use traditional banking. Simultaneously, 99.1% of Australia’s bank transactions are done digitally while cash payments are only down to 13% (Australian Banking Association 2024).
Moreover, (Ataza et al. 2024) mentions that psychological, economic, and social aspects as well as variations on interest rates can affect saving patterns in digital banking. Psychological factors; such as financial literacy, attitude towards saving, and trust in digital banks; as well as economic considerations, such as income stability and perceived economic security, could encourage the use of digital banks for savings. Social influences can also play a part in the usage of digital banks for savings, which includes peer behaviors and current trends in society. Additionally, variations or fluctuations in interest rates could impact one’s motivation to save; different rates from competing digital banks could offer higher saving rates, thus, incentivizing greater savings.
Similarly, (Alcain et al. 2024) states that, “Filipinos’ trust in e-wallets and online banks depend on factors like social influence, perceived environment, facilitating conditions, and Hedonic Motivation”. Interestingly, both studies somehow describe Hedonic Motivation where people are motivated to do activities that lead to positive emotions and avoid pain. (Alcain et al. 2024) explicitly states this concept while Ataza’s work mentioned under Psychological factors that humans aim to maximize pleasure and minimize pain, which explains that saving being not pleasurable can cause discomfort.
While (Ataza et al. 2024) factors show how certain psychological factors could motivate one’s saving habits, such as self-discipline, goal-setting, and short-term focus during dire times, (Santos and Ponchio 2021) study shows a contrast to the former, as the study focuses on how psychological and emotional barriers influence and possibly hinder the use of digital banking. 202 respondents reveal that anxiety, distrust, and discomfort with technology are some of the psychological and emotional barriers that contribute to the resistance of using digital banking, while functional barriers, such as complexity and lack of usefulness, do not necessarily contribute to the said resistance.
4 Discussion and Implications for Future Research
4.1 Synthesis of Literature
Much literature on digital banking discusses the factors influencing both the use of and resistance to digital banking and e-wallets. In other words, they mainly discuss why people use digital banking and online means of transactions and why some do not choose such methods. Generally, people use digital banks due to their convenience, accessibility, ease of use, economic value (cost reduction and time-saving aspects), service or product features, and rewards from online banking. Firm reputation is also deemed essential because customers need to trust the company first before they choose their products or services.
People can be socially influenced as well to use online banking via word of mouth, recommendations from friends, preferences of loved ones, and advertisements on social media. Moreover, in terms of economy, interest rates and income could also affect one’s consideration in using online banking, especially when it comes to saving money. Aside from these general, economic, and social factors, psychological factors can also motivate users to adopt the use of digital banking, such as self-discipline, financial literacy, attitude towards saving, and Hedonic Motivation. However, there are also psychological and emotional factors that hinder people from using digital banking, such as anxiety, distrust, and discomfort with technology, as well as conflict between norms, social values, and usage patterns.
It is evident that digital banking is very useful because it provides many benefits and advantages over traditional banking. However, despite these benefits and reasons, the preference for digital banking is not absolute or universal, as some would still choose traditional banking or physical banks, especially if the customers focus on trust, security concerns, reliability, and personalized experiences.
4.2 Implications and Future Research
Throughout the years, more and more people are using digital banking and e-wallets not just in the Philippines but also worldwide. This means that opportunities in the industry of online banking are possibly growing as well by the year. While many people are using digital banking, many are still unfamiliar with this method of banking, and there is still little literature discussing this topic. It leaves more opportunities for researchers, students, and professionals to explore digital banking and possibly fill the gap of knowledge thereof.
Furthermore, there are a lot of journal articles discussing the factors that influence financial decision-making as well as the adoption of digital banking and e-wallets. Companies and banks can use this knowledge to assess countries and regions that lack access to banking services. For instance, according to (Windasari et al. 2022), 28% of South and Central’s population have no bank accounts, while 24% and 21% of the population of Asia Pacific and North America, respectively, are unbanked. The factors that affect the intention of people to use digital banking would be useful in designing services and features of digital banking with the user’s preferences and experiences in mind.
In the Philippines, the knowledge regarding the factors influencing the use of digital banking would be beneficial in developing marketing strategies and improving transparency, communication, and trust between banks and users, especially since the country uses e-wallets like GCash, PayMaya, and GoTyme. Moreover, given that cyber thefts and glitches are happening among e-wallets in the country and that many Filipinos have security concerns with online banking, which explains why many Filipinos trust traditional banks more than digital banks, online banks and companies must consider making efforts on cybersecurity and protection to avoid compromises on the safety and security of users’ accounts.
Given that comparative studies are lacking among journal articles and research papers about digital banking as of this writing, especially in the Philippines, this calls for more articles that focus on comparisons between the preferences of digital and traditional banking and, possibly, on information about the use of digital and traditional banks between pre-pandemic, pandemic, and post-pandemic time frames.
Further research can also be applied in assessing and analyzing the different psychological, economic, and social factors that affect the decisions of users to adopt digital banking and wallets. Most literature discussing the said factors is focused solely on quantitative data. This provides researchers an opportunity to analyze digital banking from a qualitative lens, as it provides potential deeper insights into the behavior and experiences of people.
5 Charts, Figures, and Tables
5.1 Figure 1.1: Banking Preferences in Metro Manila
Figure 1.1: Banking Preferences in Metro Manila
Figure 1.1 shows the distribution of consumer’s preferences with regards to the usage of digital banking, traditional banking, and both whenever they do their transactions. It is implicated that approximately 60.5% of consumers use traditional banking, 4.4% use only digital banks, and 35.1% utilizes both traditional and digital banking.
5.2 Figure 1.2: Banking Preferences of American Gen Y and Gen Z in the United States
Figure 1.2: Banking Preferences of American Gen Y and Gen Z in the United States
Figure 1.2 shows the distribution of consumer’s preferences with regards to the usage of digital banking, traditional banking whenever they do their transactions. It is observed that 73% of American Gen Y and Gen Z utilize digital banking in comparison to 56% use digital banks.
5.3 Figure 1.3: Banking Preferences of Australians
Figure 1.3: Banking Transaction Methods in Australia
Likewise, Figure 1.3 shows the distribution of consumer’s preferences with regards to the usage of digital banking and traditional banking for their day to day use. It is observed that 99.1% of Australians utilize digital banking in comparison to 13% who uses traditional banks.
6 Conclusion
The use of digital banking is constantly developing, not only in the Philippines but also around the globe. With the continuous growth of digital banking comes the changes in people’s decision-making, financial management, and monetary transactions. More and more people, including Filipinos, are discovering and using digital banking and e-wallets due to their benefits like convenience and accessibility, which also led to an increasing amount of studies on the factors that affect such use. However, a gap in the knowledge is still seen, especially with comparative studies regarding the said topics, which calls for further research and deeper analysis. Furthermore, unlike other countries, many Filipinos still prefer the traditional means of banking to online banking due to reasons like reliability, literacy, and concerns with security. While there’s still a long way to go for digital banking to be adopted and improved, especially in the Philippines, digital banking is certainly evolving for the better.