Abstract
<title>Abstract</title> <p>Digital transformation has reshaped banking operations globally, yet its financial performance implications remain underexamined in fragile, post-conflict, and dollarized economies where formal banking coexists with dominant non-bank mobile money systems. Somalia presents such a case: commercial banks are digitalizing atop an economy already functioning on mobile money, but no firm-level empirical evidence exists on whether this transformation improves bank financial performance. This study addresses that gap by examining the relationship between digital transformation and financial performance among commercial banks in Mogadishu, Somalia, grounded in dynamic capabilities theory and the technology-organization-environment (TOE) framework. A quantitative, cross-sectional survey design was employed, targeting employees of commercial banks in Mogadishu. A sample of 124 respondents was selected through convenience sampling, and data were collected using a structured Likert-scale questionnaire covering three digital transformation dimensions, Mobile Banking Adoption, Digital Payment Infrastructure, and Data-Driven Risk Management, and analyzed using descriptive statistics and Pearson correlation in SPSS. Results indicate that all three dimensions correlate positively and significantly with financial performance, though unevenly: Mobile Banking Adoption shows the strongest association (r = .544, p < .01), Data-Driven Risk Management a moderate one (r = .449, p < .01), and Digital Payment Infrastructure the weakest (r = .232, p < .05). These findings suggest that dynamic capabilities do not convert into performance uniformly in fragile banking markets, extending TOE-based reasoning beyond the stable economies where it has previously been tested. Practically, the results offer Somali bank managers and regulators an evidence-based basis for sequencing digital investment priorities.</p>