Can cooperative banks maintain local engagement amidst digital transformation? Evidence from Italy

The digitalization of the banking industry has forced organizations to adapt to an increasingly competitive environment. This is particularly relevant for cooperative and popular banks in Italy, which have traditionally combined technical innovation with a commitment to fostering local social and economic development. This study investigates how digital transformation has influenced the relationship between the decline in cooperative bank branches and their performance in credit and deposit services, using data from 109 Italian provinces (2015–2023). The results reveal a complex impact: while home banking significantly influences deposit and consumer credit levels, the physical presence of cooperative bank branches remains crucial for credit issuance, highlighting the importance of local services. Digital tools, such as internet banking, have grown in importance, moderating the link between branch presence and deposit activity. By highlighting how digital service delivery interacts with the local roots and mutualistic nature of cooperative banks, this research contributes to understanding how innovation shapes institutional strategies. To maintain customer trust and ensuring efficient service in an increasingly digitalized environment, the study underscores cooperative banks’ need to integrate digital technology while preserving their local presence.