Research On The Impact Of Fintech On Commercial Banks’ Profitability

In recent years,the continuous improvement of modern science and technology and the development needs of the financial industry itself have led to an accelerated integration of finance and technology,and the product of their high degree of integration,namely Fintech,has become an important and indispensable part of the development plans of countries around the world.In its annual report on finance,the Central Bank mentions the need to steadily develop Fintech business and promote the widespread use of Fintech in the country.Based on this,while the development of Fintech has brought new technologies to commercial banks,it has also brought great challenges to their traditional business models.On the one hand,commercial banks are constantly innovating their operational models and strengthening cooperation with Fintech companies to build a new situation of sustainable development for both sides.At the same time,commercial banks are also actively setting up Fintech subsidiaries to continuously promote the development of Fintech.The application of Fintech has largely improved the traditional operating model of commercial banks,streamlined their business processes and pushed commercial banks into the digital era.Through the absorption and application of advanced technologies,commercial banks have continued to innovate and introduce diversified financial products and service models to meet the diverse needs of different customers.On the other hand,Fintech has had an impact on the traditional business activities of banks.Emerging Fintech companies derived from the development of Fintech focus on micro and small enterprises frequently,making commercial banks not only have to deal with the competition among traditional banks,but also the crowding out of their market resources by Fintech companies.So,how should commercial banks in China face the "double-edged sword" of Fintech,and whether they can leverage on the development of Fintech to enhance their profitability and achieve transformation and upgrading,which has become the primary issue that needs to be addressed.Therefore,it is particularly important to study the impact of Fintech on the profitability of commercial banks.Based on the research foundation of long tail theory,financial intermediation theory and financial function theory,this paper firstly,after processing the data of 188 commercial banks from 2011 to 2020,a regression analysis of the role relationship between financial technology and commercial banks’ profitability is conducted using a systematic GMM model.Secondly,the regression of the moderating effect was conducted by adding the size of commercial banks and the prosperity of the banking industry to further verify whether the impact brought by Fintech on the profitability of commercial banks is moderated by other factors.Finally,in order to test the robustness,alternative variables and supplementary control variables are selected for testing,and the results show that the empirical results are reliable.The following conclusions were reached:(1)The impact of Fintech on the profitability of commercial banks follows a "U" shaped trend of decreasing and then increasing.(2)The larger the commercial bank,the stronger the negative impact of Fintech on the profitability of commercial banks.(3)An increase in the prosperity of the banking industry can mitigate the negative impact of Fintech on the profitability of commercial banks.(4)Combining theoretical analysis and empirical results,in order to help accelerate the digital development and transformation and upgrading of commercial banks,this paper proposes relevant countermeasures on how to improve the profitability of commercial banks in China in the context of Fintech development,such as optimising revenue structure to cope with the impact of Fintech,increasing investment in Fintech to strengthen the role of technology empowerment,and strengthening external collaboration to achieve complementary resource advantages.