The Impact of Fintech Innovation and Digital Banking Investments on the Performance of Commercial Banks in Vietnam

Abstract

This study examines the impact of fintech innovation and digital banking investments on the performance of 32 commercial banks in Vietnam from 2012 to 2022. Using a Feasible Generalized Least Squares (FGLS) regression model, the findings reveal that the rise of fintech innovation—measured through e-commerce and mobile payment transaction volumes—intensifies competition between traditional banks and fintech firms, leading to a decline in bank profitability. Additionally, investments in ATM and POS infrastructure are associated with higher operational costs and reduced efficiency, negatively affecting overall performance. However, strategic investments in research and development, particularly in mobile-centric digital banking services, positively influence bank profitability. Moreover, recognition through technology and digital banking awards incentivizes banks to invest further in innovation, attracting customers, streamlining operations, strengthening brand awareness, and enhancing overall performance.