Does Fintech Improve Bank Performance? Evidence from 91 Countries

What is it about?

Financial technology, or fintech, is transforming how banks provide financial services, but its impact on bank performance may differ across countries. This study examines the relationship between fintech development and bank performance using data from 91 countries at different levels of economic development. Because fintech adoption is strongly related to a country's income level, we develop a new measure called abnormal fintech (AbFintech) to separate fintech development from the effect of GDP per capita. We find that fintech generally has a more positive impact on bank performance in less-developed countries than in more-developed countries.

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Why is it important?

Fintech can expand access to financial services, reduce costs, and create new opportunities for banks, but its benefits may not be the same across countries. Our findings show that fintech contributes most strongly to bank performance in less-developed countries, where it can help banks reach previously unbanked or underbanked customers and provide more convenient services at lower costs. The study also introduces AbFintech, a measure designed to distinguish fintech development from the influence of a country's income level. The results suggest that the benefits of fintech depend on a country's stage of economic development and can provide useful insights for banks and policymakers when considering investments in financial technology.

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