THE IMPACT OF FINTECH ADOPTION ON THE PROFITABILITY OF VIETNAMESE COMMERCIAL BANKS

Abstract

The rapid development of fintech has significantly transformed the global banking industry. In Vietnam, fintech is increasingly regarded as a key driver of digital transformation and operational efficiency in commercial banks. This study quantitatively examined the impact of fintech adoption on the profitability of Vietnamese commercial banks over the period of 2015–2024. Using a balanced panel dataset of 26 commercial banks, the research constructed a fintech proxy based on the ratio of mobile and internet banking transaction value to the population aged 15 and above, capturing the operational dimension of fintech adoption in banking activities. Recognizing that the fintech proxy reflects system-level fintech diffusion rather than bank-specific adoption, the identification strategy relies on within-bank temporal variation. To address potential endogeneity issues and profit persistence, the system generalized method of moments approach was employed, supported by comprehensive diagnostic tests including the Arellano-Bond test for first-order autocorrelation, the Arellano-Bond test for second-order autocorrelation, Sargan, and the Hansen tests. The empirical results indicated that fintech adoption has a positive and statistically significant effect on bank profitability, as measured by return on assets and return on equity. In addition, bank size, non-interest income, and economic growth were positively associated with profitability, whereas inflation was negatively associated with profitability. Overall, fintech adoption positively influences the profitability and operational efficiency of Vietnamese commercial banks, offering implications for bank managers and regulators. However, the study's fintech proxy primarily captures digital payment activities, and findings may not generalize to other fintech dimensions or institutional contexts.