The effect of digital transformation on the performance of the banking sector in Kazakhstan

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This paper examines the impact of banking digitization on the development of the banking industry, particularly on banking performance. This study aims to identify critical factors for the development of financial banks and factors for the development of banking digitization in the banking sector of Kazakhstan. Based on this purpose, the core of banking digitization and its definition will be examined. The study conducted a comprehensive analysis that provided quantitative and qualitative characteristics of the development of digital technology and its impact on the development of the banking industry. The problems set out in this paper are solved using quantitative and financial analysis methods. The point index method was used during the study. Data from Halyk Bank’s annual reports from 2019 to 2023 were used to assess digitalization's penetration into the banking industry. A panel approach is also used, allowing for data analysis for individual banks. Our research concludes that bank digitalization clearly impacts bank performance, focusing on the number of digital banking users, digital banking transactions, and IT investment growth on bank performance (such as return on equity, RoAE). The research findings provide implications for the practice of digital transformation of banks, especially in terms of digital investment and performance improvement. This study lays a foundation for future research on the impact of digital transformation on bank performance and provides a reference for investment decisions in the Kazakhstan banking industry.