Stability, Profitability, and Liquidity: How Fintech Lending Effects the Banking Trifecta

Currently, the effects of developments in financial technology are among the topics of intense interest to researchers. Whether fintech will be supportive or disruptive for the banking system is still widely debated. The impact of technologically advanced credit systems on the traditional banking system, especially on the stability and performance of the banking system, remains a controversial issue in the literature. Accordingly, the impact of fintech lending on various indicators in the banking sector is investigated. For this purpose, various results are obtained using the 22 MSCI Emerging Markets data between 2015 and 2020. Accordingly, fintech loans positively affect not only Z-Score, a measure of financial stability, but also return on assets, a measure of financial performance. On the other hand, fintech loans also positively affect bank liquidity. These results reveal the positive effects of fintech lending on the banking sector in emerging economies. Therefore, policymakers and bank managers can contribute to the continued stability of the banking system by creating favorable conditions to encourage and develop fintech lending.