Does fintech innovation improve bank efficiency? Evidence from China’s banking industry

This paper examines whether the development of the financial technology (fintech) industry affects cost efficiency and the technology adopted for China’s banking industry over the period 2003–2017. Fintech industry development indices are constructed using fintech enterprise-level data, and these in...

Full description

Saved in:
Bibliographic Details
Published in:International review of economics & finance 2021-07, Vol.74, p.468-483
Main Authors: Lee, Chi-Chuan, Li, Xinrui, Yu, Chin-Hsien, Zhao, Jinsong
Format: Article
Language:English
Subjects:
Cost efficiency
Fintech
Metafrontier
Technology gap ratios
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:This paper examines whether the development of the financial technology (fintech) industry affects cost efficiency and the technology adopted for China’s banking industry over the period 2003–2017. Fintech industry development indices are constructed using fintech enterprise-level data, and these indices measure the development extent of entire fintech industry and four sub-industries including (1) credit, deposit and capital–raising services, ​(2) payment, clearing and settlement services, (3) ​investment management services ​and ​(4) market support services. The relevant efficiency scores for Chinese banks under different ownership structures are measured by applying the stochastic metafrontier approach. The results show that state-owned commercial banks have the lowest cost efficiency and operate under inferior technology. When considering the influence of fintech development, fintech innovations not only improve the cost efficiency of banks, but also enhance the technology used by banks. This double beneficial effect is more significant in the case of market support service innovations.
ISSN:1059-0560
1873-8036
DOI:10.1016/j.iref.2021.03.009