Exploring the impact of financial technology on commercial banking efficiency

This study investigates the impact of Financial Technology (FinTech) on the efficiency of commercial banks in India. It explores whether FinTech enhances operational productivity and fosters financial inclusion in the rapidly evolving financial landscape. The research employs an empirical framework, analyzing annual data from 2012 to 2022 for 29 Indian commercial banks. Efficiency is measured using the Data Envelopment Analysis (DEA)-based Malmquist Index, while the FinTech Development Index is constructed using text-mining techniques. Regression models, including Pooled OLS, Fixed Effects, Random Effects, and Generalized Method of Moments (GMM), are employed to test hypotheses. The results indicate that FinTech adoption significantly enhances commercial bank efficiency. Innovations like mobile banking, digital payments, and blockchain technology improve customer experiences while reducing operational costs. Positive correlations were observed between FinTech development, GDP growth, and capital adequacy ratios, supporting the hypothesis that FinTech is a catalyst for efficiency and innovation in banking. The study is limited to Indian commercial banks and relies on secondary data. Future research could extend the scope to include comparative analyses across emerging markets and incorporate primary data for deeper insights. The findings emphasize the need for Indian banks to embrace digital transformation by integrating FinTech solutions into their operations. This approach could foster financial inclusion, enhance service delivery, and bolster economic growth. By leveraging FinTech, banks can improve access to financial services for underserved populations, contributing to poverty alleviation and economic equity. This study provides empirical evidence of the transformative role of FinTech in enhancing commercial banking efficiency in India, offering actionable insights for policymakers, financial institutions, and stakeholders.