The Impact Of Internet Finance On The Profitability And Risk Of Banking In China:An Empirical Study

As an emerging financial industry,Internet finance has changed our life,and it also has many impacts on the traditional financial industry.As the most important part of our financial system,banks have been affected,too.The two most important aspects are profitability and risk.Profitability is the most fundamental aspect of bank management.Avoiding risks is important to bank management and national financial system security.The paper studied the impact of Internet finance on the banks’profitability and risk,and the difference between the various types of banks.This article discussed the impact of Internet finance on the banking industry from two aspects of theory and empirical:Firstly,the article discussed,theoretically,the impact of Internet finance on the banks’ profitability and risk-taking ability,which mainly involves two parts that are the influence path based on the characteristics of the Internet finance,and the different impacts on the various types of banks.Secondly,this article analyzed,empirically,the impact of Internet finance on the banks’ profitability and risk-taking ability.By using the panel data model,the paper showing how the third-party payment and P2P impact the profitability,credit risk and liquidity risk of China’s banking industry which includes state-owned banks,joint-stock banks,city commercial banks,rural commercial banks and foreign bank.The analysis of state-owned commercial banks was based on fixed effect model estimation and the analysis of other types of banks was based on GMM dynamic panel model estimation.The results showed that Internet Finance does have a negative impact on profitability,credit risk and liquidity risk of China’s banking industry.Specifically,there is no significant effect on China’s state-owned commercial banks;joint-stock commercial banks are influenced positively;city commercial banks are influenced negatively;and there is a slight impact on the rural commercial banks and foreign commercial banks.Compared with P2P,the third-party payment has more influence on banks.Finally,based on the different effects of internet finance on various types of banks,the paper gave some suggestions on improving the profitability and risk taking ability of all kinds of banks.