How FinTech affects financial sustainability: Evidence from Chinese commercial banks using a three-stage network DEA-Malmquist model

TL;DR

This study evaluates how FinTech influences the financial sustainability of Chinese commercial banks, revealing a generally negative impact mainly through reduced loan efficiency and profitability, with some banks showing resilience due to patents or listing status.

Contribution

It introduces a three-stage network DEA-Malmquist model to assess bank FS and analyzes the mechanistic effects of FinTech, providing new insights into resilience factors.

Findings

FinTech negatively affects bank financial sustainability.

Loan efficiency and profitability are key mediators.

Patents and listed status enhance banks' resilience.

Abstract

This paper investigates the impact of financial technology (FinTech) on the financial sustainability (FS) of commercial banks. We employ a three-stage network DEA-Malmquist model to evaluate the FS performance of 104 Chinese commercial banks from 2015 to 2023. A two-way fixed effects model is utilized to examine the effects of FinTech on FS, revealing a significant negative relationship. Further mechanistic analysis indicates that FinTech primarily undermines FS by eroding banks' loan efficiency and profitability. Notably, banks with more patents or listed status demonstrate greater resilience to FinTech disruptions. These findings help banks identify external risks stemming from FinTech development, and by elucidating the mechanisms underlying FS, enhance their capacity to monitor and manage FS in the era of rapid FinTech advancement.