Abstract
As financial technology has developed, the Chinese government has deregulated banks. The first Internet-only bank was established in 2014, but the effects of Internet-only banking on traditional banks remain unclear. However, we discussed two stages (2009-2014; 2015-2018), namely before and after the entry of Internet-only banking into the financial market. Data envelopment analysis and regression methods were used to evaluate efficiency and performance and observe changes between banks in different periods, of 20 banks. The highlights of our findings are as follows: First, overall bank efficiency has improved since Internet-only banking entered the financial market. Second, in the era of low-interest spreads, banks are diversifying operational income while improving performance and efficiency. Furthermore, with the development of FinTech and competitive pressure, banks should downsize to strengthen their competitiveness and improve their internal environments. Finally, operating income generated by employees has increased, but profits have decreased, implying that employees are highly skilled and efficient. Thus, banks may be required to offer higher salaries, which reduce profits. Keywords : Internet-only bank, Network DEA, Bank efficiency, Bank performance JEL Classifications : G19, G20, G29 DOI: https://doi.org/10.32479/ijefi.10076
Highlights
In China, because of the lack of financial universality, individuals, small- and medium-sized enterprises (SMEs), and rural areas have difficulties obtaining loans from traditional banks
After Internet-only banks entered the financial industry, we focused on the following topics: (1) Whether overall efficiency can be improved through competition, (2) which financial indicators have changed profits during financial reform, and (3) whether the main profit source for banks will shift from interest on loans to noninterest income as the financial market diversifies
The operating income generated per employee was higher in 2015-2018 than in 2009-2014
Summary
In China, because of the lack of financial universality, individuals, small- and medium-sized enterprises (SMEs), and rural areas have difficulties obtaining loans from traditional banks. Financial technology (FinTech) has developed to provide various financial services on the Internet. Tencent Group owns WeChat, which is the most widely used communication software in China, and founded WeBank in 2014. These two groups have numerous customers and diverse types of business services and integrate logistical services, gold flow, and information flow to form a complete operating ecosystem. By offering innovative financial services that combine artificial intelligence and big data to perform accurate analyses, these Internet-only banks provide customers with more convenient services to achieve inclusive finance
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