FINTECH DEVELOPMENT AND COMMERCIAL BANKS

Abstract

The adoption of financial technology (fintech) by commercial banks has surged over the past decade, particularly in emerging markets, as institutions seek to enhance service delivery, reduce operational costs, and extend financial inclusion. This study synthesizes evidence from multiple regions—Africa, Asia, and the Gulf Cooperation Countries—on the impact of fintech on bank performance and efficiency. Findings reveal mixed results: while fintech initiatives such as mobile banking, internet banking, and cashless payment systems generally enhance banking access and operational efficiency, their influence on financial performance indicators like return on assets (ROA) and return on equity (ROE) varies significantly across contexts. In South Africa, mobile broadband subscriptions (MBS) showed limited correlation with profitability, except for banks that aggressively digitized operations. In Indonesia, fintech regulation had differential impacts across bank types, with regional banks experiencing more pronounced changes. In Malaysia and India, cashless payments and mobile banking were positively associated with bank efficiency and profitability. Conversely, studies from the Gulf and China highlight that increased fintech competition and investment costs can depress profitability, particularly in the short term. Overall, while fintech has broadly improved service delivery and customer reach, the associated costs and competitive pressures from neobanks and fintech firms may offset financial gains for traditional banks, especially those slow to adapt. The study underscores the need for strategic alignment between fintech investments and long-term financial goals to optimize returns.