Heterogeneous Impact of Fintech on the Profitability of Commercial Banks: Competition and Spillover Effects

Xiaoling Song, Huizhi Yu and Zehai He ()
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Xiaoling Song: Business School, Beijing Language and Culture University, Beijing 100083, China
Huizhi Yu: Tandon School of Engineering, New York University, New York, NY 10012, USA
Zehai He: Business School, Beijing Language and Culture University, Beijing 100083, China

JRFM, 2023, vol. 16, issue 11, 1-17

Abstract: Using annual panel data of 46 listed commercial banks in China from 2012 to 2021 and constructing a two-way fixed-effects model, this study empirically analyzed the competition and technology spillover effects of fintech on the profitability of commercial banks. The results showed the following: (1) In the early stages of fintech development, the competition effect was larger than the technology spillover effect; thus, it was negatively correlated with commercial banks’ profitability. However, with the spread of innovative fintech, technology spillover effects and commercial bank profitability will gradually improve. (2) The influence of fintech on the profitability of commercial banks differed. Compared with large commercial banks, fintech had more significant negative effects on small- and medium-sized commercial banks in the short run. However, the role of fintech for such banks will also grow in the future. The results of this study provide practical guidance for how commercial banks can respond to the fintech wave. To realize the sustainable development of the banking industry, commercial banks should change their business philosophy and revenue model, vigorously improve their fintech innovation capability, differentiate their choice of fintech development routes, develop personalized customization with a focus on users, and ultimately realize digital transformation and upgrading.

Keywords: fintech; commercial bank; profitability; heterogeneity analysis (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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