The Impact of Financial Technology (FinTech) on Bank Risk-Taking and Profitability in Small Developing Island States: A Study of Fiji

Shasnil Avinesh Chand (), Baljeet Singh, Krishneel Narayan and Anish Chand
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Shasnil Avinesh Chand: Department of Banking and Finance, Fiji National University, Suva P.O. Box 3722, Fiji
Baljeet Singh: School of Economics, University of the South Pacific, Suva P.O. Box 3855, Fiji
Krishneel Narayan: Department of Banking and Finance, Fiji National University, Suva P.O. Box 3722, Fiji
Anish Chand: Department of Banking and Finance, Fiji National University, Suva P.O. Box 3722, Fiji

JRFM, 2025, vol. 18, issue 7, 1-25

Abstract: With the increasing adoption of technologies such as mobile banking and blockchain, the banking sector in developing and emerging economies is experiencing both opportunities and challenges. This study examines the impact of FinTech on bank risk-taking and profitability in the small island economy of Fiji, spanning the period from 2000 to 2024. We employ a fixed-effects model and conduct robustness checks using random effects, pooled ordinary least squares (OLS), and the generalized method of moments (GMM) method, focusing on seven banks (five commercial banks and two non-bank financial institutions). Our analysis evaluates the effect of FinTech while controlling for other bank-specific factors that may influence risk-taking and profitability. The results indicate that FinTech development significantly reduces bank risk-taking and enhances profitability, suggesting a positive and substantial impact on financial performance and stability. The findings highlight the need for banks operating in Fiji and similar small economies to continue and expand their investments in FinTech innovations. Furthermore, the study suggests that regulatory bodies and policymakers should strengthen institutional and regulatory frameworks to support and guide FinTech’s evolution within the banking sector.

Keywords: FinTech; risk; profitability; fixed effect; Fiji (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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