Digital environment or fee-based business model? Bank competitiveness in Kazakhstan

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Type of the article: Research Article

Abstract
Digital transformation of banking is widely expected to reshape competition, but it remains unclear whether it strengthens individual banks’ competitive positions, particularly in emerging markets. This study examines how digitalization relates to bank competitiveness, distinguishing the national digital environment from banks’ fee-based business models and taking Kazakhstan – a digital frontrunner with an unusually profitable banking sector – as the focal case. A two-layer, two-way fixed-effects design is used: a cross-country panel of up to 147 economies (2004–2025), combining IMF Financial Soundness Indicators with the United Nations E-Government Development Index, and a bank-level panel of Kazakhstan’s second-tier banks (2016–2025), in which a fee-oriented business model is proxied by commission income relative to assets. Across countries, the strong negative cross-sectional association between digital maturity and bank profitability – a country-level correlation of −0.45 – disappears once fixed country differences are absorbed, as a standardized coefficient of −0.43 turns to an insignificant +0.09, revealing a development gradient rather than a competitive effect. No robust within-country effect on profitability, margins, spreads, or cost efficiency survives. Within Kazakhstan, by contrast, a one-standard-deviation increase in commission intensity is associated with a 0.7 percentage-point wider interest spread and a 0.8 percentage-point higher net interest margin (both p < 0.05). This bank-level relationship holds when the dominant digital bank is excluded and is stable in magnitude under more conservative inference, though its statistical significance weakens, indicating that the competitive returns associated with a fee-based business model led in this market by digital, platform-based banks are concentrated within markets, across banks, rather than across national aggregates.

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    • Figure 1. Digital maturity and banking-sector return on assets across countries (country means, 2004–2025)
    • Figure 2. Interest spread and commission income relative to assets, Kazakhstani banks (2016–2025)
    • Table 1. Descriptive statistics
    • Table 2. Cross-country development gradient (dependent variable: sector return on assets, %)
    • Table 3. Within-country effects of digital maturity on bank outcomes
    • Table 4. Dynamics and trend robustness (dependent variable: sector return on assets, %)
    • Table 5. Commission intensity and bank margins, Kazakhstan (baseline fixed-effects estimates)
    • Table 6. Robustness of the commission-intensity effect (dependent variable: interest spread)
    • Table A1. Variable definitions and sources
    • Table A2. Kazakhstan’s second-tier banks in the sample
    • Table A3. Within-country effects of digital maturity, extended governance controls
    • Table A4. Pairwise correlations
    • Table A5. Estimated country effects (main sector-ROA specification)
    • Conceptualization
      Gulzhakhan Kassymbekova, Dina Amangeldi, Galina Margatskaya, Gaukhar Kodasheva, Rakhima Bekbulatova, Aizhan Zhamiyeva, Kalamkas Rakhimzhanova
    • Resources
      Gulzhakhan Kassymbekova
    • Validation
      Gulzhakhan Kassymbekova
    • Writing – original draft
      Gulzhakhan Kassymbekova, Dina Amangeldi, Galina Margatskaya, Gaukhar Kodasheva, Rakhima Bekbulatova, Aizhan Zhamiyeva, Kalamkas Rakhimzhanova
    • Writing – review & editing
      Gulzhakhan Kassymbekova, Dina Amangeldi, Galina Margatskaya, Gaukhar Kodasheva, Rakhima Bekbulatova, Aizhan Zhamiyeva, Kalamkas Rakhimzhanova
    • Investigation
      Dina Amangeldi, Rakhima Bekbulatova
    • Methodology
      Dina Amangeldi, Kalamkas Rakhimzhanova
    • Formal Analysis
      Galina Margatskaya, Gaukhar Kodasheva
    • Software
      Galina Margatskaya, Gaukhar Kodasheva, Aizhan Zhamiyeva
    • Data curation
      Rakhima Bekbulatova
    • Project administration
      Kalamkas Rakhimzhanova
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