Issue #4 (Volume 21 2026)

Type of the article: Research Article

Abstract
Between 2005 and 2024, the digital divide separating former Soviet economies outside the EU from EU member states shrank from 44.8 to 2.4 points of a composite 0–100 index, and whether banking systems converted this catch-up into better performance is an open question. The paper evaluates the intermediation efficiency and productivity of banking in 24 transition economies during 2010–2024 and quantifies their relationship with digital infrastructure, paying special attention to Armenia, Kazakhstan, and Ukraine. Efficiency is measured with input-oriented window DEA on deposit funding, operating costs, lending, and profitability; productivity with Malmquist indices; and digital infrastructure with a principal-component index of internet, mobile, and broadband penetration. The estimation relies on two-way fixed effects with Driscoll-Kraay and bootstrap inference on 356 country-year observations. Productivity is flat overall with a Malmquist mean of 0.995, yet technological change moves from below unity through 2015 to above unity in 2016–2023, a regime shift robust to the output set and the translation constant. Within countries, the index is unrelated to efficiency levels, productivity growth, cost efficiency, and stability outcomes; the baseline cost-to-income and credit-risk associations dissolve under country-specific trends and differencing. Cumulative productivity reaches 1.162 in Kazakhstan and 1.106 in Armenia by 2024, while Ukraine climbs back to 0.856. Frontier renewal after 2016, rather than a measurable dividend from connectivity, is the substantive finding, and expectations of direct efficiency or stability gains from digital infrastructure should remain modest, particularly in postwar Ukraine.