Does Fintech Investment in Commercial Banks Improve Business Performance? -- Based on the Empirical Test of 42 Listed Commercial Banks in China from 2010 to 2022

Abstract

This article aims to empirically examine the impact of internal fintech investment on operational performance using both a two-way fixed effects model and a mediation effect model. Take banks in China as research target. Through manually collected unbalanced panel data from 42 listed commercial banks spanning the years from 2010 to 2022. The key findings are as follows. First, investments in fintech significantly enhance the operational performance of banks. However, compared to state-owned banks and share-owned banks, the positive effect of fintech investments on the performance of urban commercial banks and rural commercial banks is more significant. Secondly, mediation tests on operational costs and business scope channels have revealed that fintech could achieve "cost reduction and efficiency enhancement" for urban and rural commercial banks by enhancing operational efficiency and expanding their business scope. Nonetheless, this effect is not significantly evident in state-owned banks and share-owned banks. Thirdly, further empirical testing on market share indicates that fintech investments significantly boost the market share of joint-stock commercial banks, corroborating the notion that fintech could augment the competitiveness of commercial banks. The insights garnered from this study contribute to understanding and augmenting existing research on the microeconomic consequences of the strategic fintech investment undertaken by commercial banks. Furthermore, it offers valuable references for future policies aimed at propelling the digital transformation of traditional banking industries.