Policy Recommendations for Enhancing the Competitiveness and Business Performance of Digital Banks in Vietnam

Abstract The digital transformation of the banking sector is reshaping competitive dynamics, requiring institutions to align technological innovation with service quality, human capital, and customer experience. Despite growing global attention, limited empirical research explores the specific determinants of competitiveness and business performance in digital banks within emerging markets. Thus, this study develops and empirically validates a structural equation model to examine the key factors influencing digital bank competitiveness and performance in Vietnam. A mixed-methods approach was adopted, combining qualitative insights from 30 expert interviews with a large-scale survey of 935 digital banking professionals across five major cities. Fourteen hypotheses and one moderating effect were tested using Partial Least Squares Structural Equation Modeling (PLS-SEM) via SmartPLS 3.0. The findings reveal that customer satisfaction is the strongest predictor of both competitiveness and business performance, with service quality, digital human resources, and financial technology also exerting significant direct and indirect effects. Digital transformation not only enhances performance directly but also moderates the relationship between customer satisfaction and performance. The validated model accounts for 33.9% of the variance in business performance and 32.7% in competitiveness. This study contributes a novel integrative framework that highlights the interplay between customer-centricity and digital capabilities in driving strategic outcomes. Policy recommendations include enhancing customer satisfaction mechanisms, investing in digital workforce development, and promoting strategic digital transformation initiatives. These insights provide actionable guidance for policymakers and banking leaders seeking to strengthen the resilience and performance of digital banks in emerging economies.