IDEAS home Printed from https://ideas.repec.org/a/eco/journ1/2020-05-26.html
   My bibliography  Save this article

Implications of Fintech Developments for Traditional Banks

Author

Listed:
  • Kuan-Chieh Chen

    (Department of money and banking, National Chengchi University, No. 64, Sec. 2, Zhinan Rd., Wenshan Dist., Taipei City 116, Taiwan)

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.

Suggested Citation

  • Kuan-Chieh Chen, 2020. "Implications of Fintech Developments for Traditional Banks," International Journal of Economics and Financial Issues, Econjournals, vol. 10(5), pages 227-235.
    • Handle: RePEc:eco:journ1:2020-05-26
    as

    Download full text from publisher

    File URL: https://www.econjournals.com/index.php/ijefi/article/download/10076/pdf
    Download Restriction: no
    File URL: https://www.econjournals.com/index.php/ijefi/article/view/10076/pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Irina Japparova & Ramona Rupeika-Apoga, 2017. "Banking Business Models of the Digital Future: The Case of Latvia," European Research Studies Journal, European Research Studies Journal, vol. 0(3A), pages 846-860.
    2. Sang Joon Ahn & Seong Ho Lee, 2019. "The Effect of Consumers’ Perceived Value on Acceptance of an Internet-Only Bank Service," Sustainability, MDPI, vol. 11(17), pages 1-9, August.
    3. Evelyn Hayden & Daniel Porath & Natalja Westernhagen, 2007. "Does Diversification Improve the Performance of German Banks? Evidence from Individual Bank Loan Portfolios," Journal of Financial Services Research, Springer;Western Finance Association, vol. 32(3), pages 123-140, December.
    4. Fukuyama, Hirofumi & Matousek, Roman, 2011. "Efficiency of Turkish banking: Two-stage network system. Variable returns to scale model," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(1), pages 75-91, February.
    5. Holod, Dmytro & Lewis, Herbert F., 2011. "Resolving the deposit dilemma: A new DEA bank efficiency model," Journal of Banking & Finance, Elsevier, vol. 35(11), pages 2801-2810, November.
    6. Enrica Detragiache & Thierry Tressel & Poonam Gupta, 2008. "Foreign Banks in Poor Countries: Theory and Evidence," Journal of Finance, American Finance Association, vol. 63(5), pages 2123-2160, October.
    7. Boubakri, Narjess & Mirzaei, Ali & Samet, Anis, 2017. "National culture and bank performance: Evidence from the recent financial crisis," Journal of Financial Stability, Elsevier, vol. 29(C), pages 36-56.
    8. Lensink, Robert & Hermes, Niels, 2004. "The short-term effects of foreign bank entry on domestic bank behaviour: Does economic development matter?," Journal of Banking & Finance, Elsevier, vol. 28(3), pages 553-568, March.
    9. Robert DeYoung, 2005. "The Performance of Internet-Based Business Models: Evidence from the Banking Industry," The Journal of Business, University of Chicago Press, vol. 78(3), pages 893-948, May.
    10. Piyadasa Edirisuriya & Abeyratna Gunasekarage & Michael Dempsey, 2015. "Australian Specific Bank Features and the Impact of Income Diversification on Bank Performance and Risk," Australian Economic Papers, Wiley Blackwell, vol. 54(2), pages 63-87, June.
    11. Fukuyama, Hirofumi & Matousek, Roman, 2017. "Modelling bank performance: A network DEA approach," European Journal of Operational Research, Elsevier, vol. 259(2), pages 721-732.
    12. Cook, Wade D. & Liang, Liang & Zhu, Joe, 2010. "Measuring performance of two-stage network structures by DEA: A review and future perspective," Omega, Elsevier, vol. 38(6), pages 423-430, December.
    13. Fries, Steven & Taci, Anita, 2005. "Cost efficiency of banks in transition: Evidence from 289 banks in 15 post-communist countries," Journal of Banking & Finance, Elsevier, vol. 29(1), pages 55-81, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Cheolho Yoon & Dongsup Lim, 2021. "Customers’ Intentions to Switch to Internet-Only Banks: Perspective of the Push-Pull-Mooring Model," Sustainability, MDPI, vol. 13(14), pages 1-20, July.
    2. Stefanos Balaskas & Maria Koutroumani & Kiriakos Komis & Maria Rigou, 2024. "FinTech Services Adoption in Greece: The Roles of Trust, Government Support, and Technology Acceptance Factors," FinTech, MDPI, vol. 3(1), pages 1-19, January.
    3. Mehmet Çağlar & Seyhan Nişel, 2024. "Efficiency measurement of fintech companies: a two-stage DEA approach," Electronic Commerce Research, Springer, vol. 24(2), pages 1335-1366, June.
    4. Pampurini, Francesca & Pezzola, Annagiulia & Quaranta, Anna Grazia, 2024. "Lending business models and FinTechs efficiency," Finance Research Letters, Elsevier, vol. 65(C).
    5. Bahati Sanga & Meshach Aziakpono, 2022. "The impact of technological innovations on financial deepening: Implications for SME financing in Africa," African Development Review, African Development Bank, vol. 34(4), pages 429-442, December.
    6. Pradeep Dwivedi & Jawaher Ibrahim Alabdooli & Rajeev Dwivedi, 2021. "Role of FinTech Adoption for Competitiveness and Performance of the Bank: A Study of Banking Industry in UAE," International Journal of Global Business and Competitiveness, Springer, vol. 16(2), pages 130-138, December.
    7. Mashaal A. M. Saif & Nazimah Hussin & Maizaitulaidawati Md Husin & Ayed Alwadain & Ayon Chakraborty, 2022. "Determinants of the Intention to Adopt Digital-Only Banks in Malaysia: The Extension of Environmental Concern," Sustainability, MDPI, vol. 14(17), pages 1-32, September.
    8. Galeone, Graziana & Ranaldo, Simona & Fusco, Antonio, 2024. "ESG and FinTech: Are they connected?," Research in International Business and Finance, Elsevier, vol. 69(C).
    9. Ruihui Pu & Deimante Teresiene & Ina Pieczulis & Jie Kong & Xiao-Guang Yue, 2021. "The Interaction between Banking Sector and Financial Technology Companies: Qualitative Assessment—A Case of Lithuania," Risks, MDPI, vol. 9(1), pages 1-22, January.
    10. Campanella, Francesco & Serino, Luana & Battisti, Enrico & Giakoumelou, Anastasia & Karasamani, Isabella, 2023. "FinTech in the financial system: Towards a capital-intensive and high competence human capital reality?," Journal of Business Research, Elsevier, vol. 155(PA).
    11. Luiz Antonio Joia & Rodrigo Proença, 2022. "The social representation of fintech from the perspective of traditional financial sector professionals: evidence from Brazil," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-27, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Halkos, George & Tzeremes, Nickolaos & Kourtzidis, Stavros, 2014. "Measuring the efficiency of banking systems: A relational two-stage window DEA approach," MPRA Paper 55671, University Library of Munich, Germany.
    2. Degl'Innocenti, Marta & Kourtzidis, Stavros A. & Sevic, Zeljko & Tzeremes, Nickolaos G., 2017. "Investigating bank efficiency in transition economies: A window-based weight assurance region approach," Economic Modelling, Elsevier, vol. 67(C), pages 23-33.
    3. Fukuyama, Hirofumi & Matousek, Roman & Tzeremes, Nickolaos G., 2020. "A Nerlovian cost inefficiency two-stage DEA model for modeling banks’ production process: Evidence from the Turkish banking system," Omega, Elsevier, vol. 95(C).
    4. Mohamed Dia & Amirmohsen Golmohammadi & Pawoumodom M. Takouda, 2020. "Relative Efficiency of Canadian Banks: A Three-Stage Network Bootstrap DEA," JRFM, MDPI, vol. 13(4), pages 1-25, April.
    5. Panagiotis Mitropoulos & Ioannis Mitropoulos, 2020. "Performance evaluation of retail banking services: Is there a trade‐off between production and quality?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(7), pages 1237-1250, October.
    6. An, Qingxian & Yan, Hong & Wu, Jie & Liang, Liang, 2016. "Internal resource waste and centralization degree in two-stage systems: An efficiency analysis," Omega, Elsevier, vol. 61(C), pages 89-99.
    7. Partovi, Elmira & Matousek, Roman, 2019. "Bank efficiency and non-performing loans: Evidence from Turkey," Research in International Business and Finance, Elsevier, vol. 48(C), pages 287-309.
    8. Michal Jurek, 2014. "Role and impact of different types of financial institutions on economic performance and stability of the real sector in selected EU member states," Working papers wpaper36, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    9. Fukuyama, Hirofumi & Matousek, Roman, 2018. "Nerlovian revenue inefficiency in a bank production context: Evidence from Shinkin banks," European Journal of Operational Research, Elsevier, vol. 271(1), pages 317-330.
    10. Kourtzidis, Stavros & Matousek, Roman & Tzeremes, Nickolaos G., 2021. "Modelling a multi-period production process: Evidence from the Japanese regional banks," European Journal of Operational Research, Elsevier, vol. 294(1), pages 327-339.
    11. Manthos D. Delis & Sotirios Kokas & Steven Ongena, 2016. "Foreign Ownership and Market Power in Banking: Evidence from a World Sample," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(2-3), pages 449-483, March.
    12. Degl’Innocenti, Marta & Matousek, Roman & Sevic, Zeljko & Tzeremes, Nickolaos G., 2017. "Bank efficiency and financial centres: Does geographical location matter?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 46(C), pages 188-198.
    13. Serhat Yuksel & Hasan Dincer & Senol Emir, 2017. "Comparing the performance of Turkish deposit banks by using DEMATEL, Grey Relational Analysis (GRA) and MOORA approaches," World Journal of Applied Economics, WERI-World Economic Research Institute, vol. 3(2), pages 26-47, December.
    14. Usman Bashir & Zaheer Abbas & Muntazir Hussain, 2014. "The Effect of Foreign Bank Presence on Domestic Banks Performance: An Evidence from a Developing Economy," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 2(2), pages 36-50, April.
    15. Di, Wenhua & Pattison, Nathaniel, 2023. "Industry Specialization and Small Business Lending," Journal of Banking & Finance, Elsevier, vol. 149(C).
    16. Phung, Manh-Trung & Cheng, Cheng-Ping & Guo, Chuanyin & Kao, Chen-Yu, 2020. "Mixed Network DEA with Shared Resources: A Case of Measuring Performance for Banking Industry," Operations Research Perspectives, Elsevier, vol. 7(C).
    17. Li, Feng & Zhu, Qingyuan & Chen, Zhi, 2019. "Allocating a fixed cost across the decision making units with two-stage network structures," Omega, Elsevier, vol. 83(C), pages 139-154.
    18. Alexandre Momparler & Carlos Lassala & Domingo Ribeiro, 2013. "Efficiency in banking services: a comparative analysis of Internet-primary and branching banks in the US," Service Business, Springer;Pan-Pacific Business Association, vol. 7(4), pages 641-663, December.
    19. Kaffash, Sepideh & Azizi, Roza & Huang, Ying & Zhu, Joe, 2020. "A survey of data envelopment analysis applications in the insurance industry 1993–2018," European Journal of Operational Research, Elsevier, vol. 284(3), pages 801-813.
    20. Burki, Abid A. & Ahmad, Shabbir, 2010. "Bank governance changes in Pakistan: Is there a performance effect?," Journal of Economics and Business, Elsevier, vol. 62(2), pages 129-146, March.

    More about this item

    Keywords

    Internet-only bank; Network DEA; Bank efficiency; Bank performance;
    All these keywords.

    JEL classification:

    • G19 - Financial Economics - - General Financial Markets - - - Other
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eco:journ1:2020-05-26. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ilhan Ozturk (email available below). General contact details of provider: http://www.econjournals.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.