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Digitalization and its impact on commercial banks’ profitability in Vietnam

Author

Listed:
  • Huong Mai Nguyen

    (National Economics University, Hanoi, Vietnam)

  • Huyen Thi Ngoc Pham

    (National Economics University, Hanoi, Vietnam)

  • Khue Minh Tran

    (National Economics University, Hanoi, Vietnam)

  • Mai Thi Tuyet Nguyen

    (National Economics University, Hanoi, Vietnam)

  • Yen Thi Hai Nguyen

    (National Economics University, Hanoi, Vietnam)

Abstract

Amid the rapid development of the digital economy in Vietnam, traditional industries, including commercial banking, must recognize digitalization as both a prevailing trend and an essential requirement for sustainable development. This study utilizes the Feasible Generalized Least Squares (FGLS) regression method to examine the impact of digitalization on the profitability of Vietnamese commercial banks from 2013 to 2022. Profitability is measured by Return on Assets (ROA), while the digitalization level is represented by the ICT Index (Information and Communication Technology Development and Application Readiness Index). The model also incorporates two control variables: Credit Risk and Solvency. The findings demonstrate that digitalization has improved profitability in commercial banks. Additionally, credit risk is found to have a negative impact on the profitability (ROA) of commercial banks, while the solvency ratio shows the opposite. Based on these results, the authors propose recommendations to enhance the digitization process and consequently elevate operational efficiency and profitability in Vietnamese commercial banks.

Suggested Citation

  • Huong Mai Nguyen & Huyen Thi Ngoc Pham & Khue Minh Tran & Mai Thi Tuyet Nguyen & Yen Thi Hai Nguyen, 2025. "Digitalization and its impact on commercial banks’ profitability in Vietnam," HO CHI MINH CITY OPEN UNIVERSITY JOURNAL OF SCIENCE - ECONOMICS AND BUSINESS ADMINISTRATION, HO CHI MINH CITY OPEN UNIVERSITY JOURNAL OF SCIENCE, HO CHI MINH CITY OPEN UNIVERSITY, vol. 15(1), pages 152-164.
    • Handle: RePEc:bjw:econen:v:15:y:2025:i:1:p:152-164
    DOI: 10.46223/HCMCOUJS.econ.en.15.1.3281.2025
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    References listed on IDEAS

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    3. Chen, Xiao & Huang, Bihong & Ye, Dezhu, 2020. "Gender gap in peer-to-peer lending: Evidence from China," Journal of Banking & Finance, Elsevier, vol. 112(C).
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    5. Athanasoglou, Panayiotis & Delis, Manthos & Staikouras, Christos, 2006. "Determinants Of Bank Profitability In The South Eastern European Region," MPRA Paper 10274, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    commercial banks; digitalization; ICT index; profitability; Vietnam;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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