The Impact of Internet Finance on Traditional Commercial Banks

Abstract

The rapid growth of internet finance has changed the financial system in China and in the world. Internet finance, with Alipay as an example, has broken the old business model of commercial banks. Banks depend a lot on interest income and fees from services. Alipay, with tools like mobile payments, Yu’e Bao savings, and credit products such as Huabei and Jiebei, has gained many users. It has also changed how people save, invest, and borrow. These changes have taken away banks’ share in payments, reduced their deposits, and made competition in retail lending stronger. This paper looks at the effect of internet finance on traditional commercial banks. It uses Alipay as a case study. Based on earlier studies and data analysis, the paper shows how Alipay affects banks’ payment systems, deposit collection, and lending work. This article also looks at what this means for banks’ profits, risk control, and customer service. With the data from 18 large commercial banks and numbers from Alipay, the study shows the pressure and changes that banks face.