The Impact Of Fintech On The Credit Risk Of Commercial Banks In China

The advancement of financial technology(fintech)has driven the development of China’s financial industry and brought challenges and opportunities to traditional financial institutions,particularly impacting the operation and development of commercial banks’ credit business.The "14th Five-Year Plan" proposes to "improve the level of fintech and enhance financial inclusiveness" while "safeguarding the bottom line of preventing systemic risks." Therefore,studying the impact of fintech on commercial bank credit risk is of great significance in preventing and resolving credit risks,enhancing the stability of the financial system,and promoting high-quality economic development in China.This paper first systematically reviews and comments on existing literature,summarizes and defines the concept of fintech from multiple perspectives,clearly demonstrates the different effects and mechanisms of fintech on commercial bank credit risk while attempting to improve the deficiencies in existing research.Secondly,the paper reviews the development of fintech in China and explains the three theoretical foundations that fintech influences commercial bank credit risk:information asymmetry theory,long-tail theory,and profit margin effect theory.Based on the above theory,the article analyzes the transmission mechanisms of fintech’s impact on commercial bank credit risk in China from four aspects:weakening the intermediary role of commercial banks,affecting the operation of commercial bank credit business,increasing the technological operation burden of commercial banks,and regulatory gaps causing risk diffusion.It also analyzes three heterogeneity features:different bank types,regions,and employee education levels,proposes relevant hypotheses based on theoretical analysis,and constructs econometric models.In the empirical analysis,based on panel data from 492 commercial banks in China from 2011 to 2018,panel data from 327 cities,and the matching of the digital inclusive finance index of each prefecture-level city,the paper uses the fixed-effect model,two-way fixed-effect model,and SYS-GMM method to analyze the impact of fintech on commercial bank credit risk and conducts a series of robustness checks and heterogeneity analyses.The study found that:(1)the improvement of fintech level has a positive promoting effect on commercial bank credit risk in China;(2)the improvement of fintech level has a significant positive promoting effect on credit risk for joint-stock commercial banks and city commercial banks but no significant impact on foreign-funded banks and rural financial institutions.The improvement of fintech level has a significant positive promoting effect on credit risk for commercial banks in western China but no significant impact on banks in eastern and central China.However,the deepening of digital finance usage has a significant positive promoting effect on credit risk for commercial banks in eastern China;and(3)the promoting effect of fintech on commercial bank credit risk exhibits a "U-shaped" pattern.Finally,according to the results of theoretical and empirical analysis,this paper puts forward following relevant policy suggestions:(1)Steadily improve the level of financial technology:timely correct errors in the process of financial innovation,scientifically and effectively balance the risks and the benefits,and continuously improve the risk management system;(2)Differentiated development of financial technology:Different types of commercial banks should implement a distinctive layout of financial technology;in the face of the current situation of unbalanced economic development in different regions,investment and usage of financial technology should be differentiated;commercial banks with insufficient talent reserves should pay more attention to the construction of the talent pool,by means of not only accelerating the pace of talent introduction,but also strengthening talent training;(3)Refining the financial technology regulatory system:In the new era of the development of financial technology,promoting regulatory technology and improving the institutional system can play a role in the healthy operation of the financial industry.