Impact of Digital Transformation on Employees’ Job Performance with Self-Efficacy as a Mediator in the Banking Industry in Kandy District, Sri Lanka

Abstract

In the twenty-first century, digital transformation has emerged as a key driver of competitiveness in the banking sector by enabling improved efficiency, service delivery, and customer experience through technologies such as artificial intelligence, online banking platforms, and automation systems. This study examines the impact of digital transformation on employee job performance in Sri Lanka’s banking sector, with a specific focus on state-owned banks in the Kandy District. In addition, the study investigates the mediating role of self-efficacy in this relationship. The Kandy District was selected due to its significance as a major regional financial hub in Sri Lanka, hosting both state-owned and private banking institutions that actively implement digital banking initiatives. Despite this rapid adoption of digital technologies, limited empirical evidence exists on how these transformations influence employee job performance at the regional level, particularly in developing-country banking contexts. Most existing studies focus on customer adoption or technological outcomes, while insufficient attention has been given to employees’ psychological readiness, especially self-efficacy, in shaping performance outcomes during digital transformation. This creates a clear research gap that this study aims to address. A quantitative, cross-sectional survey design was employed, and primary data were collected from 241 employees out of 256 targeted respondents in selected state-owned banks. The study utilized structured questionnaires with validated scales, and data were analyzed using descriptive statistics, reliability and validity testing, correlation and regression analysis, and mediation analysis using Hayes’ PROCESS Macro Model 4. The findings reveal that digital transformation has a significant positive relationship with employee job performance. Furthermore, selfefficacy was found to partially mediate this relationship, indicating that employees’ confidence in their digital capabilities strengthens the effectiveness of digital transformation initiatives on performance outcomes. The results highlight that technological investments alone are insufficient unless accompanied by strategies that enhance employee self-efficacy through training, support systems, and user-friendly digital environments. This study contributes to existing literature by providing contextual evidence from Sri Lanka’s banking sector and extending understanding of the psychological mechanisms underlying digital transformation and employee performance relationships. It also offers practical implications for policymakers and bank managers to improve digital adoption strategies by focusing on employee capability development and psychological empowerment