THE IMPACT OF DIGITAL PAYMENT SYSTEMS DEVELOPMENT ON THE BANKING SECTOR: A COMPARATIVE ANALYSIS OF CENTRAL ASIAN COUNTRIES
DOI:
https://doi.org/10.5281/zenodo.17752984Keywords:
digital payments; mobile banking; fintech; financial inclusion; panel data; difference-in-differences; Central Asia.Abstract
This study investigates the impact of digital payment systems development on banking sector performance
across five Central Asian countries—Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan, and Turkmenistan—using panel
data spanning 2015–2024. The rapid expansion of mobile payment technologies, electronic banking platforms, and
fintech innovations has significantly transformed the financial services landscape in the region, raising essential questions
regarding the adaptation of traditional banking institutions to digital transformation. Using a comprehensive econometric
framework, including fixed and random effects models, difference-in-differences estimation, and dynamic panel analysis
through the system GMM estimator, the research examines the relationship between digital payment adoption, bank
profitability, credit portfolio dynamics, and financial inclusion. The empirical results indicate that mobile payment volume
growth positively affects total banking revenues, demonstrating complementarity rather than substitution with traditional
banking services. Difference-in-differences estimation based on the staggered introduction of national digital platforms
reveals significant improvements in financial inclusion, with treatment effects ranging from 12% to 18%. Dynamic panel
estimations confirm the persistence of digital transformation effects and the existence of cross-country heterogeneity driven
by initial conditions and regulatory environments. The Hausman test favors fixed effects, underscoring the importance
of controlling for unobserved country-specific characteristics. The findings highlight the transformative potential of digital
payment infrastructures in fostering banking sector development and financial deepening in transition economies and
stress the need for regulatory frameworks that ensure risk management and equitable access to digital financial services
References
1. Arellano, M., & Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application
to employment equations. Review of Economic Studies, 58(2), 277–297.
2. Beck, T., Demirgüç-Kunt, A., & Levine, R. (2007). Finance, inequality and the poor. Journal of Economic Growth, 12(1),
27–49.
3. Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of
Econometrics, 87(1), 115–143.
4. Central Bank of Kazakhstan. (2024). Payment Systems Statistics. Almaty: National Bank of Kazakhstan.
5. Central Bank of Uzbekistan. (2024). Annual Report on Payment Systems. Tashkent: Central Bank of Uzbekistan.
6. Christensen, C. M. (1997). The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail. Boston:
Harvard Business School Press.
7. Demirgüç-Kunt, A., Klapper, L., Singer, D., & Ansar, S. (2022). The Global Findex Database 2021. Washington, DC:
World Bank.
8. Diamond, D. W., & Dybvig, P. H. (1983). Bank runs, deposit insurance, and liquidity. Journal of Political Economy,
91(3), 401–419.
9. Fuster, A., Plosser, M., Schnabl, P., & Vickery, J. (2019). The role of technology in mortgage lending. Review of
Financial Studies, 32(5), 1854–1899.
10. GSMA. (2024). State of the Industry Report on Mobile Money. London: GSM Association.
11. Hausman, J. A. (1978). Specification tests in econometrics. Econometrica, 46(6), 1251–1271.
12. International Monetary Fund. (2024). Financial Access Survey. Washington, DC: IMF.
13. Jack, W., & Suri, T. (2014). Risk sharing and transaction costs: Evidence from Kenya’s mobile money revolution.
American Economic Review, 104(1), 183–223.
14. Jagtiani, J., & Lemieux, C. (2018). Do fintech lenders penetrate areas that are underserved by traditional banks?
Journal of Economics and Business, 100, 43–54.
15. Levine, R. (2005). Finance and growth: Theory and evidence. In P. Aghion & S. N. Durlauf (Eds.), Handbook of
Economic Growth (Vol. 1, pp. 865–934). Elsevier.
16. Philippon, T. (2016). The fintech opportunity. NBER Working Paper No. 22476.
17. Rochet, J. C., & Tirole, J. (2003). Platform competition in two-sided markets. Journal of the European Economic
Association, 1(4), 990–1029.
18. Schumpeter, J. A. (1934). The Theory of Economic Development. Cambridge, MA: Harvard University Press.
19. Suri, T., & Jack, W. (2016). The long-run poverty and gender impacts of mobile money. Science, 354(6317), 1288–
1292.
20. World Bank. (2024). Global Financial Development Database. Washington, DC: World Bank Group.
21. World Bank. (2024). World Development Indicators. Washington, DC: World Bank Group
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2025 GREEN ECONOMY AND DEVELOPMENT
This work is licensed under a Creative Commons Attribution 4.0 International License.