Digitalization's Dual Impact on Banking: Evidence from Türkiye and the EU

This study examines how digital infrastructure and internet penetration shape structural change in the banking industry in Türkiye and 24 EU member states between 2004 and 2024. We use a large panel dataset and second-generation econometric techniques, including both fixed- and random-effects models, to assess how internet usage, mobile subscriptions, and broadband access affect key banking indicators, such as employment, branch networks, ATMs (Automated Teller Machines), and POS (Point of Sale) terminals. Our findings reveal a dual nature of digitalization\\\'s impact. As more people gain internet and broadband access, a clear substitution effect reduces physical banking infrastructure (branches and ATMs) and leads to a slight drop in employment. Mobile network expansion creates new digital roles, linking it positively to employment, even as ATMs supplement branches. By offering solid, cross-national evidence that separates these conflicting effects within a single analytical framework, this study adds to the body of knowledge. Our findings provide crucial insights for policymakers and financial institutions navigating the digital transition, as they present a groundbreaking analysis that simultaneously examines substitution and complementarity dynamics using the most recent data within a 20-year panel.