How Does Financial Technology Affect the Credit and Risk of Commercial Banks in China?

Abstract

Purpose - Fintech integrates the characteristics of “finance + technology”, applying emerging technologies such as big data, cloud computing, artificial intelligence, and blockchain, leading to a great challenge to existing financial service providers. With the rise in development of financial technology, Chinese fintech firms and online payments including third-party and mobile payments systems have attracted worldwide attention. Therefore, this paper aims to study the potential impact of financial technology on the traditional credit business of the banking sector from the perspectives of credit expansion and risk-sharing. Moreover, this study also explores how fintech influences Chinese commercial banks with the moderating effect of corporate governance.
 Design/Methodology/Approach - The study used a firm-level panel data of 34 Chinese banks over a period of 10 years from 2011 to 2020. The study applies a fixed regression method for hypotheses examining the relationship between fintech development and the credit supply and risk-taking of commercial banks.
 Findings - The results indicate that the development of fintech has significant impacts on the scale of credit loan and the level of risk bearing. Further research finds that board independence as a moderator positively and significantly influences fintech and bank credit loan scales, while board independence positively but insignificantly affects fintech and risk control in the banking sector.
 Research Implications - This paper enriches our understanding of the impacts of fintech on traditional financial institutions, and provides a new method for the operations of the banking sector. In addition, this paper provides a new research perspective for managers, especially in Chinese banking, to expand credit business under the moderating role of corporate governance mechanism.