DO FINTECH INNOVATIONS MATTER FOR THE EFFICIENCY AND STABILITY OF BANKS IN SOUTH AFRICA?

Abstract

Aim: This study investigates the impact of financial technology (Fintech) innovations on the efficiency and stability of banks listed on the Johannesburg Stock Exchange (JSE) between 2000 and 2023.Method: Using panel data techniques, the study employs Stochastic Frontier Analysis (SFA) to assess bank efficiency, Z-Score to assess bank stability, and the Generalized Method of Moments (GMM) to evaluate the relationships between fintech and banking sector dynamics. Key Findings: The results indicate that fintech innovations, particularly mobile transactions, significantly enhance operational efficiency in South African banks. However, fintech adoption has no statistically significant effect on banking sector stability, which remains largely influenced by traditional capital structures. Theoretical Contributions: The present study builds on existing research by concurrently examining the impact of fintech on both bank efficiency and stability, thereby providing a more comprehensive and nuanced perspective, an area that remains underexplored in emerging markets. Policy Implications: From a policy perspective, the findings underscore the need for a comprehensive regulatory framework that fosters innovation while safeguarding financial stability in South Africa's evolving banking landscape.