Impact of Fintech on Performance of Banks: Empirical Evidence From Jordan

The study attempts to examine the relationship of market structure variable with the performance of Nepalese commercial banks over the period 2011-2015 using causal research design. The stratified sampling technique has been employed to select sample banks which include 10 commercial banks comprising 5 joint venture and 5 local private banks. A pooled OLS model is specified, and then the indicators of market structure are used as explanatory variables in the regression model. Study results have shown that market concentration has had a negative and significant impact on the performance of the Nepalese commercial banks. Where the Herfindahl-Hirschman index (HHI) is used the market shares as the main variable to measure the concentration (CONC). Empirical results revealed that lower the market concentration higher will be the performance of the bank. On the other hand, study concluded that market power has positive influence on profitability. The Data Envelopment Analysis (DEA) method was used to assess the efficiency scores. On the contrary, empirical results indicated that there is no relationship between the bank’s efficiency and performance in Nepalese commercial banks. As far as the ownership structure is concerned, study found that, ROA differences depend on bank ownership types. Study concluded that performance of the joint venture banks is better than local private banks in sample period.

In recent years, green credit has significantly supported the development of the sustainable economy. However, the existing literature presents differing views on the impact of green credit on bank performance, which is crucial for the sustainability of green credit business. Meanwhile, FinTech is comprehensively empowering green credit business. This paper investigates whether FinTech influences the effect of green credit on bank performance. Based on an analysis of data from 127 Chinese commercial banks from 2007 to 2022, we find that green credit significantly enhances bank performance, and FinTech further amplifies this positive effect. This finding partially explains the conflicting views in the existing literature, as the impact of green credit on bank performance varies under different levels of FinTech. We believe that FinTech exerts its influence through three mechanisms: cost reduction, reputation enhancement, and risk mitigation. Heterogeneity analysis reveals that the impact of FinTech is more pronounced in city commercial banks, in samples with better green credit development, and during banking industry downturns. Finally, we recommend that banks actively develop FinTech and apply it to green credit businesses to maximize the positive effects of green credit. Simultaneously, regulators and governments should provide necessary support for banks.

This paper examines the impact of agent banking activities, a recent FinTech development, on the financial performance of commercial banks in Bangladesh, as agent banking has been receiving significant global attention due to its technology driven approach, cost-effective and easy accessibility and broader coverage to the unbanked population. Employing a panel data regression framework, the study estimates a random effect model using the bank-level quarterly data from nine commercial banks in Bangladesh that have been operating full-scale agent banking services including deposit mobilization and credit disbursement over the period from 2018Q1 to 2024Q4. The empirical findings indicate that credit disbursement by agent banks has a positive and statistically significant impact on bank profitability measures, return on asset (ROA) and return on equity (ROE). Similarly, the number of agent banking outlets has a significant positive impact on ROA. Therefore, an appropriate agent banking policy aimed at increasing agent banking outlets using digital platforms based on FinTech is vital for ensuring positive growth in credit disbursement in order to improve the financial performance of the banking sector in a developing country like Bangladesh.

PurposeThe purpose of the paper is to empirically explore the economic effect of advertising spending on the performance of banks on a sample consisting of all banks listed on the Dhaka Stock Exchange over the period spanning from 2011 to 2019.Design/methodology/approachA dynamic panel data autoregressive approach of two-step system generalized method of moments (2-SGMM) estimation technique has been adopted in this study to analyze the contemporary and carryover effect of advertising on the financial performance of banks.FindingsThe findings indicate that advertising expenditure boosts banks' accounting returns but not their market value. Furthermore, advertising has a negative carryover effect on the financial performance of banks and is statistically significant for operating profit and return on equity. This finding demonstrates that the economic benefits of advertising expenditure lapse entirely within the current period and ought to be treated as an expense since it does not bring any future return for the banks in Bangladesh. In addition, this paper also offers no critical contrast between the impact of advertising spending on the performance of both conventional and Islamic banks operating in Bangladesh.Originality/valueTo the best of the authors' knowledge, no study so far has looked into the effect of advertising on the profitability and the market value of the banks operating in Bangladesh, and this is the first study that explores this relationship.

The objective of this study is to provide empirical evidence on how ownership structure and owner’s identity affect performance, in the banking industry by using a panel of Indonesia banks over the period 2000–2009. Firstly, we analysed the impact of the presence of multiple blockholders on bank ownership structure and performance. Building on multiple agency and principal-principal theories, we investigated whether the presence and shares dispersion across blockholders with different identities (i.e. central and regional government; families; foreign banks and financial institutions) affected bank performance, in terms of profitability and efficiency. We found that the number of blockholders has a negative effect on banks’ performance, while blockholders’ concentration has a positive effect. Moreover, we observed that the dispersion of ownership across different types of blockholders has a negative effect on banks’ performance. We interpret such results as evidence that, when heterogeneous blockholders are present, the disadvantage from conflicts of interests between blockholders seems to outweigh the advantage of the increase in additional monitoring by additional blockholder. Secondly, we conducted a joint analysis of the static, selection, and dynamic effects of different types of ownership on banks’ performance. We found that regional banks and foreign banks have a higher profitability and efficiency as compared to domestic private banks. In the short-run, foreign acquisitions and domestic M&As reduce the level of overhead costs, while in the long-run they increase the Net Interest Margin (NIM). Further, we analysed NIM determinants, to asses the impact of ownership on bank business orientation. Our findings lend support to our prediction that the NIM determinants differs accordingly to the type of bank ownership. We also observed that banks that experienced changes in ownership, such as foreign-acquired banks, manifest different interest margin determinants with respect to domestic or foreign banks that did not experience ownership rearrangements.

The impact of FinTech on bank performance: A systematic literature review

This study provides empirical evidence on executive compensation and bank performance. The objective of this study is to examine the influence director compensation, CEO compensation, chairman’s compensation and CEO ownership on bank performance. This study employed a quantitative and longitudinal research design in which secondary data were collected from the quoted banks in the Nigeria Stock Exchange from 2012 to 2016. Multiple regression technique, descriptive statistic, Pearson correlation matrix, Variance Inflation Factor for multicollinearity and Breusch-Pagan-Godfrey Heteroskedasticity test for heteroskedasticity in the regression results the data analysis are performed using EViews 8.0 econometric software. The empirical results show that director compensation has a negative and insignificant influence on bank performance measured by return on equity, CEO compensation has a positive and a significant influence on bank performance, chairman compensation has a negative and a significant influence on bank performance, CEO ownership has a positive and insignificant influence on bank performance while the control variable, firm size has positive and insignificant influence on bank performance. The study recommended that quoted companies in Nigeria should be more concern of CEO ownership and compensation as it had a negative impact on the performance of the organization. The study recommends that quoted banks in Nigeria should be more concern of chairman’s compensation due to it negative influence on bank performance. The study also suggests that remuneration drive CEO motivation to enhance performance.

This study presents an empirical analysis of ownership structure and bank performance in the UAE banking system. To examine the control exerted by owners on bank performance, we employed a panel data on selected banks in the UAE from 2011 to 2017 using two-stage least squares to estimate the system of two equations. We use reverse causality to account for any endogeneity issues between ownership structure and bank performance. Our results found no reverse causality between ownership structure and bank performance. The study registered ownership structure to be a driver of bank performance but recorded bank performance not to be a driven factor of ownership structure. The study also found macroeconomic factors not to be impacted by both ownership structure and bank performance. The research could help in examining the nature of existing bank ownership structure in the economy and consequently aid the UAE government in developing ownership regulations for the banking industry.

FinTech is a developing technology which primarily changed the way of banking. The association between banks and FinTech got the attention of many scholars. In this regard, the present research aimed to investigate the influence of financial technology on the Pakistani banking sector’s financial performance including both Islamic and non-Islamic banks for tenure of 5 years comprising of 2018-2022. Four Islamic banks and all the conventional banks except micro finance banks were chosen as a sample for this study. The analysis of the present research is grounded on the independent variable Fintech (Internet banking, Mobile banking and ATM transactions) and the dependent variable financial performance (ROA, ROE and EPS) of both banking systems. The researcher collected quantitative data as per the quantifiable nature of the study from the yearly statements of the concerned banks and State Bank of Pakistan website. Linear model regression of panel data was used to derive the empirical outcomes from the analysis of financial technology and banks’ fiscal performance. The outcomes of the research resulted that overall Pakistani banking sector’s financial performance was insignificantly impacted by FinTech with reference to ROA and ROE. But individually fiscal performance of Islamic banks has been positively influenced by financial technology while insignificant impact on conventional banks’ financial performance in reference with ROA and ROE. Moreover, the outcomes of the research further resulted that FinTech has positive significant impact on the financial performance of Pakistani banking sector as a whole with respect to EPS. Theoretically, the present study added latest information to the existing literature regarding Pakistani banking sector’s performance in liaison with FinTech. Practically, the present study has dual implications. From customers’ perspective the use of FinTech services creates easiness for clients to avail banking services irrespective of the time and place constraints. While from banks’ perspective the use of FinTech services by customers promotes the agenda of green banking by reducing paperwork in the form of vouchers as well as improves operational efficiency.

The impact of fintech on the performance of traditional banking remains contentious, with its underlying economic mechanisms still an urgent research priority. Utilizing panel data from 2010 to 2022, this study investigates the dynamic relationship between fintech development and traditional banking performance. The results demonstrate that emerging digital financial sectors, as early adopters of fintech, generate positive externalities on traditional banking performance through business model innovation. Conversely, traditional banks’ internal fintech adoption exhibits a U -shaped relationship with their performance. These findings comprehensively reveal the dynamic interplay between fintech and commercial banking evolution, offering critical insights for informing development strategies for digital finance.

Research on the Impact of Fintech on the Performance of Commercial Banks

This paper examines the impact of agent banking activities, a recent FinTech development, influencing the profitability and financial outcomes of commercial banks operating in Bangladesh, as agent banking has been receiving significant global attention due to its technology-driven approach, cost-effectiveness and easy accessibility, and broader coverage of the unbanked population. Through the application of penal data regression methods, the study estimates a random-effect model using panel data comprising quarterly observations from nine Bangladeshi commercial banks that maintained uninterrupted agent banking activities, covering both deposit mobilization and lending during the period from 2018Q1 to 2024Q4. The empirical findings indicate that credit disbursement by agent banks has a positive and statistically significant impact on bank profitability measures, return on assets (ROA), and return on equity (ROE). Similarly, the expansion of agent banking outlets positively and significantly influences ROA. Therefore, an appropriate agent banking policy aimed at increasing agent banking outlets using digital platforms based on FinTech is vital for ensuring positive growth in credit disbursement to achieve improved financial outcomes for the banking sector in a developing country like Bangladesh.

Aim/Purpose: This study aimed to examine the effect of marketing knowledge management (MKM) on bank performance via the mediating role of the Fintech innovation in Jordanian commercial banks. Background: An extensive number of studies found a significant relationship between Marketing knowledge management and bank performance (e.g., Akroush & Al-Mohammad, 2010; Hou & Chien 2010; Rezaee & Jafari, 2015; Veismoradi et al., 2013). However, there remains a lack of clarity regarding the relationship between marketing knowledge management (MKM) and bank performance (BP). Furthermore, the linkage between MKM and BP is not straightforward but, instead, includes a more complicated relationship. Therefore, it is argued that managing marketing knowledge management assets and capabilities can enhance performance via the role of financial innovation as a mediating factor on commercial banks; to date, however, there is no empirical evidence. Methodology: Based on a literature review, knowledge-based theory, and financial innovation theory, an integrated conceptual framework has been developed to guide the study. A quantitative approach was used, and the data was collected from 336 managers and employees in all 13 Jordanian commercial banks using online and in hand instruments. Structural equation modeling (SEM) was used to analyze and verify the study variables. Contribution: This article contributes to theory by filling a gap in the literature regarding the role of marketing knowledge management assets and capabilities in commercial banks operating in a developing country like Jordan. It empirically examined and validated the role of Fintech innovation as mediators between marketing knowledge management and bank performance Findings: The main findings revealed that marketing knowledge management had a significant favorable influence on bank performance. Fintech innovation acted as partial mediators in this relationship. Recommendations for Practitioners: Commercial banks should be fully aware of the importance of knowledge management practices to enhance their financial innovation and bank performance. They should also consider promoting a culture of practicing knowledge management processes among their managers and employees by motivating and training to promote innovations. Recommendation for Researchers: The result endorsed Fintech innovation’s mediating effect on the relationship between the independent variable, marketing knowledge management (assets and capabilities), and the dependent variable bank performance, which was not addressed before; thus, it needs further validation. Future Research: The current designed research model can be applied and assessed further in other sectors, including banking and industrial sectors across developed and developing countries. It would also be of interest to introduce other variables in the study model that can act as consequences of MKM capabilities, such as financial and non-financial performance measures

Through the collection of secondary data, the study was conducted to understand the impact of economic integration on banking performance in Vietnam. The data of the article is taken from 21 commercial banks in Vietnam from the period 2010 - 2021. The research results show that economic integration has an impact on banking performance through economic freedom indexes and financial freedom. Besides, the results also show that many factors related to the internal characteristics of banks also have an impact on bank performance including bank size, diversification of banking products, cost of banking activities, and equity ratio. Economic environmental factors also have an impact on bank performance. GDP has a positive and statistically significant relationship with banking performance. From the research results, the article proposes governance implications for managers of Vietnamese commercial banks. The obtained results have contributed more empirical evidence on the impact of economic integration on the banking performance of developing countries

This study analyzed the effect of board structure characteristics on bank performance. Over a sample of 50 banks in five Eurozone countries, including the UK, Germany, France, Italy, and Spain, during the period 2000–2019, our empirical evidence has suggested that most board characteristics increase bank performance, while the separation of the roles of CEO and chairman inhibits it. By using fixed effects and random effects regressions, as well as a pooled OLS panel data estimation, we have found that a board size of between 7 and 10 has a significant impact on bank performance. In addition to board size, we have also found that board independence has a positive and significant impact on bank performance. Furthermore, results have shown that the number of board meetings and financial experts plays an important role on bank performance. In contrast, there is no considerable increase in bank performance when the role of CEO and chairman is separated.