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Beyond innovation: Fintech credit and its ripple effects on traditional banking profitability

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  • Hodula, Martin

Abstract

This study examines the relationship between fintech credit growth and traditional banking sector profitability. It finds a robust negative relationship between the two, suggesting that a rise of alternative credit lines could rival traditional banking and even lead to subdued bank profitability. The negative relationship is stronger for banking sectors that are more concentrated and operate with higher interest margins. These results prompt strategic considerations for banks, such as partnerships and innovation.

Suggested Citation

  • Hodula, Martin, 2024. "Beyond innovation: Fintech credit and its ripple effects on traditional banking profitability," Finance Research Letters, Elsevier, vol. 63(C).
    • Handle: RePEc:eee:finlet:v:63:y:2024:i:c:s1544612324003374
    DOI: 10.1016/j.frl.2024.105307
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    More about this item

    Keywords

    Banking; Competition; Digital lending; Fintech; Profitability;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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