The Impact of Developing Fintech on Banks

From the Perspective of Net Interest Margin and Non-performing Ratio

Abstract

In recent years, the rapid development of financial technology (fintech) has greatly impacted the traditional banking industry, posing both challenges and opportunities for banks. In this study, we investigate the influence of fintech on the net interest margin and non-performing loan ratio of banks in China.To measure the level of fintech development in banks, we construct a Bank Fintech Development Index (BFDI) based on text analysis of annual reports. We then use a panel data regression model to analyze the impact of fintech development on the net interest margin and non-performing loan ratio of banks, controlling for other factors such as bank size, capital adequacy, and macroeconomic conditions.Our empirical results show that the development of fintech has a significant positive impact on the net interest margin of banks, indicating that banks that have adopted fintech are able to generate higher profits from their interest-bearing assets. We also find that the development of fintech has a significant negative impact on the non-performing loan ratio of banks, suggesting that fintech can help banks improve their risk management and reduce their credit losses.Therefore, banks should continue to embrace fintech and invest in new technologies to remain competitive in the rapidly evolving financial landscape.