The evolution of digital banking has brought profound changes to the global financial ecosystem. Leveraging advancements in mobile technology, artificial intelligence, cloud computing, and data analytics, digital banking platforms now offer customers seamless, 24/7 access to financial services. These innovations have not only enhanced convenience and user experience but also challenged the foundational structures of traditional banking institutions. As customer expectations shift toward faster, more personalized services, and competition intensifies from fintech startups and technology giants, traditional banks face significant pressure to innovate or risk obsolescence. This research paper examines the rise of digital banking, including its historical evolution, technological enablers, and regional adoption patterns. It also explores the impact on traditional banks, focusing on how legacy systems, regulatory frameworks, and customer behavior are forcing transformation. The paper highlights real-world case studies, analyzes strategic responses by major financial institutions, and discusses emerging trends such as open banking, AI-driven services, and decentralized finance. Furthermore, the study addresses the challenges of cybersecurity, ethical concerns regarding data use, and the digital divide affecting financial inclusion. Ultimately, this paper argues that the future of banking lies in a hybrid model that merges the reliability and trust of traditional banks with the innovation and agility of digital platforms. Through comprehensive analysis, this research provides insights into how traditional banks can not only survive but thrive in a digitally-driven world.