Digital Banking and Customer Financial Behavior

Abstract

The rapid expansion of digital banking has fundamentally transformed the way individuals interact with financial institutions and manage their personal finances. This review article critically examines contemporary literature published between 2019 and 2026 to analyze the impact of digital banking adoption on customer financial behavior. Drawing on insights from behavioral finance, technology acceptance theories, and socio-economic perspectives, the study synthesizes existing research on how digital banking influences saving, spending, borrowing, and payment behaviors. The review reveals that digital banking enhances convenience, accessibility, and real-time financial awareness, thereby increasing customer engagement with formal financial systems. However, the findings also highlight mixed behavioral outcomes, with evidence of both improved financial planning and heightened risks of impulsive spending, over-borrowing, and reduced self-control. Psychological factors such as cognitive biases, trust, and perceived risk, along with technological features like interface design, automation, and digital nudges, play a crucial mediating role in shaping these behaviors. Additionally, socio-economic characteristics and digital literacy levels significantly moderate behavioral responses to digital banking. The review identifies key gaps in the literature, particularly the lack of integrative frameworks that simultaneously address technological, psychological, and socio-economic dimensions of financial behavior. The study concludes that digital banking is not behaviorally neutral and emphasizes the need for responsible digital design, consumer protection, and inclusive policies to ensure that digital banking contributes to sustainable financial well-being.