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Implications of Fintech Developments for Traditional Banks

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  • 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
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    Cited by:

    1. Galeone, Graziana & Ranaldo, Simona & Fusco, Antonio, 2024. "ESG and FinTech: Are they connected?," Research in International Business and Finance, Elsevier, vol. 69(C).
    2. 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.
    3. 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.
    4. 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).
    5. 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.
    6. 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.
    7. 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.
    8. 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.
    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.

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    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

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