Based on the bank’s external intermediary effect test.
Note: ***, ** and * mean significant at the level of 1%, 5% and 10%, respectively. Source: own calculations. Software: Stata.
In the context of the continuous innovation of block-chain, artificial intelligence, 5G,
and other emerging technologies that have brought greater impact to the business scope,
business model and risk behavior of traditional banks, research on the relationship between
This paper uses the short panel data of 155 local SME banks from 2011 to 2016 and the
digital financial index compiled by the Digital Finance Research Center of Peking University
to evaluate the causal connection, transmission mechanism and heterogeneity between
the development of Fintech and bank risk-taking. The main conclusions of this study are
as follows: (1) there is a significant negative correlation between Fintech development
level and bank risk-taking, that is, the development of Fintech will reduce the bank’s
risk-taking and improve the overall stability of the bank’s operations. After considering
the existing endogenous problems and the robustness test, this relationship still holds.
(2) The impact of Fintech on bank risk-taking is heterogeneous. This article analyzes the
Fintech development level of the eastern, western and central regions of China and banks
of different sizes. It can be found that the Fintech level of the eastern and western regions
can reduce the risk of banks more than the central regions. The development of Fintech has
a greater impact on small and medium-sized banks. From the perspective of institutional
differences, Fintech has a restraining effect on the overall risk of banks, and the restraining
effect of city commercial banks is stronger than that of rural commercial banks. (3) The
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transmission path of Fintech’s influence on banks’ risk-taking mainly includes internal
channels and external channels of banks. The results show that the net interest margin and
management costs within banks are part of the intermediary factors of Fintech affecting
bank risk. In effect, the external market competition channels of banks will suppress bank
risks, while the households’ willingness to save channels will amplify bank risks.
In general, our article and other researchers have found that the level of Fintech
has heterogeneity for different types of bank risk-taking, and some scholars have even
proposed an inverted U-curve relationship between them. Regarding the impact of Fintech
on banks of different sizes, it is also agreed by academia that the impact on small and
medium-sized banks will be greater. The main innovation of this article are as follows.
First of all, compared with the development of internet finance, this article pays more
attention to the impact of the technical characteristics of Fintech on the financial industry,
we created a households’ welfare utility function to illustrate the impact of Fintech on
the traditional financial system. For example, the P2P online lending platform has faced
many risks such as credit risk and fundraising risk since its inception, but data-based risk
control models established through big data such as “microfinance credit management
cloud service platform” and “Bojinyun risk control system” are effectively monitoring
funds and reducing risks. Secondly, for this technological impact, this article pays more
attention to the behavior of small and medium-sized banks. Finally, we conduct in-depth
excavations on the basis of the channels and mechanisms through which the development
of Fintech affects bank risk-taking.
In light of our research conclusions, we give the following policy implications and
suggestions: (1) Facing the competition and impact of Fintech, traditional banks should
actively embrace Fintech and adapt to the new technological revolution. Small and medium-
sized Banks can conduct in-depth cooperation with technology companies, and large Banks
can set up teams for independent research and development. Apply Fintech in a variety
of ways, innovate business models, improve customer experience, and quickly realize the
digital transformation of banks themselves. (2) Fintech has a positive impact on bank risks,
but the negative impact cannot be ignored. Banks should absorb the positive spillover
effects of Fintech. Building a bank risk early warning platform and risk monitoring
mechanism through new technologies, such as big data mining, improve the bank risk
management level. Meanwhile we must also pay attention to preventing the negative
spillover effects of Fintech. Through the use of big data, artificial intelligence and other
advanced technology to take precautions against risks before and after the event, and
build a firewall mechanism to resist the spread and transmission of Fintech risks. (3)The
state gives preferential policies to the central and western regions and backward regions
to develop financial technology. Through policy support to narrow regional differences,
promote the balanced development of Fintech and drive the all-round development of
inclusive finance, and then create a benign economic environment and financial conditions
for the stable operation and risk management of banks. (4) Rural commercial banks have
a higher risk tolerance and are more vulnerable to the impact of financial technology.
To this, we should increase policy preferences for rural financial institutions such as
rural commercial banks, rural credit cooperatives, and village and town banks. Establish
a rural financial service system based on government supervision departments, rural
financial institutions and rural economic entities, and coordinate the tripartite relationship
to strengthen government supervision, improve the efficiency of rural financial institutions,
and optimize the credit reporting system of rural economic entities, thereby forming a
safe and efficient rural financial service system. (5) Fintech has dual factors of finance and
technology. The combination of financial fragility and creative disruptive characteristics
of technology may lead to more disruptive financial instability. To this end, government
regulators must not only encourage the use and progress of Fintech, but also necessary
to strengthen the supervision of new financial services of commercial banks and Fintech
companies. Borrow from the idea of a ‘regulatory sandbox’, regulators can use new