Study on the Impact of Digital Finance on Non-Performing Loan Rate of Chinese Commercial Banks

Abstract

Affected by COVID-19, global economic growth is in recession, geopolitical conflicts are continuing, commercial banks' credit risk is climbing and profitability is facing severe changes. There are new opportunities in the crisis. Recently, with the development of the digital economy, digital finance is increasingly used in commercial banks, which can better meet regulatory needs and information needs, and effectively improve the bank's ability to control risks. Based on the development of digital technology and commercial banks, we collect panel data from 30 provinces and cities from 2011-2020 and use a two-way fixed effects model to explore the impact of digital finance on commercial banks' NPL rate. The results show that modern technology can effectively suppress the credit risk of China’s commercial banks. In addition, due to the existence of financial exclusion and development differences between the east and west, there is a heterogeneity of fintech in different dimensions and power points in different regions. Based on the research results, we put forward relevant suggestions on how to create a good financial environment, increase the supply of financial technology and grow the advantages of it, which are of great practical significance to reduce systemic financial risks and build up a good financial ecological environment.