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Is fintech good for bank performance? The case of mobile money in the East African Community

Author

Listed:
  • Serge Ky

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

  • Clovis Rugemintwari

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

  • Alain Sauviat

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

Abstract

Mobile money, a technology-driven innovation in financial services, has profoundly penetrated the financial landscape in Sub-Saharan Africa, including banks. Yet, besides anecdotal evidence, little is known about whether mobile money adoption enhances or worsens bank performance. Combining hand-collected data with balance sheet data from Bankscope for a panel of 170 financial institutions over the period 2009-2015, we find a strong positive and significant relationship between the time elapsed since banks' adoption of mobile money and their performance considering an array of proxies of bank profitability, efficiency and stability. In further investigations, we show how bank specialization and size alter such an association. Our results are robust to using instrumental variables, controlling for bank and macro level confounding factors, bank fixed effects and considering alternative measures of bank performance and mobile money adoption. Furthermore, we show that enhanced income diversification and broadened access to deposits are possible channels through which banks involved in mobile money improve their performance. Overall, our findings highlight the bright side of cooperation between banks and mobile network operators in the provision of mobile money.

Suggested Citation

  • Serge Ky & Clovis Rugemintwari & Alain Sauviat, 2019. "Is fintech good for bank performance? The case of mobile money in the East African Community," Working Papers hal-02155077, HAL.
    • Handle: RePEc:hal:wpaper:hal-02155077
    Note: View the original document on HAL open archive server: https://hal.science/hal-02155077
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    References listed on IDEAS

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    Cited by:

    1. Soon Suk Yoon & Hongbok Lee & Ingyu Oh, 2023. "Differential Impact of Fintech and GDP on Bank Performance: Global Evidence," JRFM, MDPI, vol. 16(7), pages 1-17, June.
    2. Chen, Xihui & You, Xuyuan & Chang, Victor, 2021. "FinTech and commercial banks' performance in China: A leap forward or survival of the fittest?," Technological Forecasting and Social Change, Elsevier, vol. 166(C).
    3. Ky, Serge Stéphane & Rugemintwari, Clovis & Sauviat, Alain, 2021. "Friends or Foes? Mobile money interaction with formal and informal finance," Telecommunications Policy, Elsevier, vol. 45(1).
    4. Ntwiga, Davis Bundi, 2020. "Fintech and banks collaboration: Does it influence efficiency in the banking sector?," KBA Centre for Research on Financial Markets and Policy Working Paper Series 40, Kenya Bankers Association (KBA).

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    Keywords

    Fintech; Mobile money; Innovation; Bank performance; East African Community;
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