Non-Equilibrium Dynamics of Digital Expansion: A Stability–Fragility Trade-off in Vietnamese Commercial Banks

Non-Equilibrium Dynamics of Digital Expansion: A Stability–Fragility Trade-off in Vietnamese Commercial Banks | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article Non-Equilibrium Dynamics of Digital Expansion: A Stability–Fragility Trade-off in Vietnamese Commercial Banks Nam Anh Quach, Dung Phuong Thi Bui This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-9217622/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract This paper develops a non-equilibrium framework to analyze the systemic implications of digital expansion in banking networks. Departing from the conventional view that digitalization is monotonically stabilizing, we model the banking system as a stochastic dynamical process in which digital expansion acts as a structural perturbation to both the drift and covariance operators. Within this framework, we formally establish the existence of a stability–fragility trade-off and derive a critical threshold beyond which marginal stability gains are reversed. The theoretical mechanism is characterized by a spectral phase transition: as digital expansion increases, the system’s covariance structure undergoes concentration, leading to the detachment of a dominant eigenmode. This transition is identified using random matrix theory through deviations of the largest eigenvalue from the Marchenko–Pastur bound, providing a rigorous diagnostic of endogenous systemic risk. Empirically, we test the model using panel data from 27 Vietnamese commercial banks over the period 2010–2024. A dynamic panel GMM specification is employed as a reduced-form representation of the underlying stochastic system, allowing us to estimate the nonlinear impact of digital expansion on banking stability. The results reveal a statistically significant turning point, beyond which digital expansion amplifies fragility rather than resilience. Complementary rolling-window spectral analysis confirms the persistent detachment of a systemic mode, consistent with the theoretical predictions. These findings demonstrate that digital transformation is not an additive technological improvement but a structural reconfiguration of financial networks. In emerging markets, unbalanced digital expansion, particularly when technological capacity outpaces risk-processing capability, can endogenously generate systemic vulnerability. The results have direct policy implications for the design of digitalization metrics and the sequencing of financial inclusion strategies. Non-equilibrium dynamics Digital expansion Banking stability Systemic risk Random matrix theory Marchenko–Pastur law Spectral phase transition Financial networks Dynamic panel GMM Emerging markets Full Text Additional Declarations The authors declare no competing interests. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-9217622","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":611705347,"identity":"25262093-6c32-45e6-973a-7c4320e36c5f","order_by":0,"name":"Nam Anh Quach","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAAA9UlEQVRIiWNgGAWjYLACxgYQycP4+E8FkGZmbiBaC7MBzxmQFkbitbBJ8LYhuDiBOfvpxM+FO6wT+9vPHpCQnFcbzd8O1PKjYhtOLZY9uZulZ55JT5xxJi/BwHDb8dwZhxkbGHvO3MapxeBA7gZp3rbDiQ03eAwSErcdy20AamFmbMOj5fzbzb9BWuYDtRw4OOdY7nyCWm7kbgPbsuEGj2FjY0NN7gbCWt5us+ZtSzfeeCbHmJnh2IHcjUAtB/H65Xzu5tu8bday846fMf/NUFOXO+/84YMPflTg1gIFzDDGYTB5gJB6ZC11RCgeBaNgFIyCkQYAJ8Fh8iX1/zgAAAAASUVORK5CYII=","orcid":"https://orcid.org/0009-0000-7962-6695","institution":"Hong Bang International University","correspondingAuthor":true,"prefix":"","firstName":"Nam","middleName":"Anh","lastName":"Quach","suffix":""},{"id":611705698,"identity":"8bb9bb51-082a-4cb6-bfc4-c08886b642f7","order_by":1,"name":"Dung Phuong Thi Bui","email":"","orcid":"https://orcid.org/0009-0001-7144-3365","institution":"Bank for Investment and Development of Vietnam","correspondingAuthor":false,"prefix":"","firstName":"Dung","middleName":"Phuong Thi","lastName":"Bui","suffix":""}],"badges":[],"createdAt":"2026-03-25 03:34:01","currentVersionCode":1,"declarations":{"humanSubjects":false,"vertebrateSubjects":false,"conflictsOfInterestStatement":false,"humanSubjectEthicalGuidelines":false,"humanSubjectConsent":false,"humanSubjectClinicalTrial":false,"humanSubjectCaseReport":false,"vertebrateSubjectEthicalGuidelines":false},"doi":"10.21203/rs.3.rs-9217622/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-9217622/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":105462818,"identity":"f37396da-93d6-44b3-9374-7611725a553b","added_by":"auto","created_at":"2026-03-26 10:13:45","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":599154,"visible":true,"origin":"","legend":"","description":"","filename":"NonEquilibriumDynamicsofDigitalExpansionAStabilityFragilityTradeoffinVietnameseCommercialBanks1update.pdf","url":"https://assets-eu.researchsquare.com/files/rs-9217622/v1_covered_78ffde36-6c5d-4f44-b36a-49c216420ae2.pdf"}],"financialInterests":"The authors declare no competing interests.","formattedTitle":"\u003cp\u003eNon-Equilibrium Dynamics of Digital Expansion: A Stability–Fragility Trade-off in Vietnamese Commercial Banks\u003c/p\u003e","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":true,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"Non-equilibrium dynamics, Digital expansion, Banking stability, Systemic risk, Random matrix theory, Marchenko–Pastur law, Spectral phase transition, Financial networks, Dynamic panel GMM, Emerging markets","lastPublishedDoi":"10.21203/rs.3.rs-9217622/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-9217622/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eThis paper develops a non-equilibrium framework to analyze the systemic implications of digital expansion in banking networks. Departing from the conventional view that digitalization is monotonically stabilizing, we model the banking system as a stochastic dynamical process in which digital expansion acts as a structural perturbation to both the drift and covariance operators. Within this framework, we formally establish the existence of a stability\u0026ndash;fragility trade-off and derive a critical threshold beyond which marginal stability gains are reversed.\u003c/p\u003e \u003cp\u003eThe theoretical mechanism is characterized by a spectral phase transition: as digital expansion increases, the system\u0026rsquo;s covariance structure undergoes concentration, leading to the detachment of a dominant eigenmode. This transition is identified using random matrix theory through deviations of the largest eigenvalue from the Marchenko\u0026ndash;Pastur bound, providing a rigorous diagnostic of endogenous systemic risk.\u003c/p\u003e \u003cp\u003eEmpirically, we test the model using panel data from 27 Vietnamese commercial banks over the period 2010\u0026ndash;2024. A dynamic panel GMM specification is employed as a reduced-form representation of the underlying stochastic system, allowing us to estimate the nonlinear impact of digital expansion on banking stability. The results reveal a statistically significant turning point, beyond which digital expansion amplifies fragility rather than resilience. Complementary rolling-window spectral analysis confirms the persistent detachment of a systemic mode, consistent with the theoretical predictions.\u003c/p\u003e \u003cp\u003eThese findings demonstrate that digital transformation is not an additive technological improvement but a structural reconfiguration of financial networks. In emerging markets, unbalanced digital expansion, particularly when technological capacity outpaces risk-processing capability, can endogenously generate systemic vulnerability. The results have direct policy implications for the design of digitalization metrics and the sequencing of financial inclusion strategies.\u003c/p\u003e","manuscriptTitle":"Non-Equilibrium Dynamics of Digital Expansion: A Stability–Fragility Trade-off in Vietnamese Commercial Banks","msid":"","msnumber":"","nonDraftVersions":[{"code":1,"date":"2026-03-26 10:13:25","doi":"10.21203/rs.3.rs-9217622/v1","editorialEvents":[{"type":"communityComments","content":0}],"status":"published","journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true}}],"origin":"","ownerIdentity":"bd2cceed-7ea5-4675-a506-75c0281f3ee9","owner":[],"postedDate":"March 26th, 2026","published":true,"recentEditorialEvents":[],"rejectedJournal":[],"revision":"","amendment":"","status":"posted","subjectAreas":[],"tags":[],"updatedAt":"2026-03-26T10:13:25+00:00","versionOfRecord":[],"versionCreatedAt":"2026-03-26 10:13:25","video":"","vorDoi":"","vorDoiUrl":"","workflowStages":[]},"version":"v1","identity":"rs-9217622","journalConfig":"researchsquare"},"__N_SSP":true},"page":"/article/[identity]/[[...version]]","query":{"redirect":"/article/rs-9217622","identity":"rs-9217622","version":["v1"]},"buildId":"XKTyCvWXoU3ODBz1xrDgd","isFallback":false,"isExperimentalCompile":false,"dynamicIds":[84888],"gssp":true,"scriptLoader":[]}