The Effect of ICT Investment, Fintech Applications, and Digital Transformation on Bank Efficiency and Income Diversification

Abstract

Purpose: Following Decision 749/QĐ-TTg of 2020 on the National Digital Transformation Program, digital transformation in the banking sector has been strongly promoted. This study assesses the impact of IT investment, Fintech applications, and Digital transformation on the operational efficiency and revenue diversification of 22 Vietnamese commercial joint stock banks during the period 2019-2024.
Design/methodology/approach: This study uses four indicators to measure banking performance: Profitability (ROA, ROE), Cost management efficiency (CEM), and Technical efficiency (TE). It also applies the FGLS methodology to panel data of Vietnamese commercial banks from 2019 to 2024 to assess the impact of IT investment, fintech applications, and digital transformation.
Findings: The empirical findings indicate that IT investment, fintech applications, and digital transformation significantly enhance the operational efficiency of Vietnamese commercial banks, as reflected in higher returns on total assets and improved technical efficiency. In particular, investments in IT human resources have a significant and comprehensive impact on bank performance. Moreover, IT investment, fintech adoption, and digital transformation strongly foster revenue diversification during the 2019-2024 period, with the effects being especially pronounced for investments in technical infrastructure and IT human capital.
Originality/value: This study provides a comprehensive assessment of the impact of IT investment, fintech, and digital transformation on banking performance in Vietnam since the National Digital Transformation Strategy was officially implemented in 2020, and offers policy implications for the digital transformation direction of the banking industry and commercial banks until 2025.