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Can banking concentration improve regional FinTech development?

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  • Qiao, Chengzhi

Abstract

Rising competition, expanding service goals, and integrating business channels and banks through innovative digital technologies all contribute to regional FinTech development in the banking sector. This study uses the two-way fixed effects approach and prefectural-level data from 2011 to 2020 to examine the relationship between banking concentration and regional FinTech development. Findings reveal that higher concentration in the banking industry can promote the development of regional FinTech and show an inverted U-shaped connection, implying that reasonable competition in banking produces more positive results. Furthermore, the benefits come from improving the industry's structure and fostering technological innovation. Moreover, the effects of mediation vary from legal governance to urban market development (hereafter marketization). Specifically, more marketized cities show a more favorable market environment when examining the variations in degrees of marketization. Furthermore, the reduction in banking concentration has a significant positive impact on these cities. Conversely, communities with a low degree of marketization show a slower rate of development and a lower ability to adapt to changes in banking concentration. The heterogeneity test in the rule of law environment reveals that cities with a high rule of law environment have more market order than those with a low rule of law environment. Furthermore, a decline in banking concentration is likely to significantly influence FinTech.

Suggested Citation

  • Qiao, Chengzhi, 2025. "Can banking concentration improve regional FinTech development?," International Review of Financial Analysis, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:finana:v:99:y:2025:i:c:s1057521925000237
    DOI: 10.1016/j.irfa.2025.103936
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