Fintech credit growth and commercial bank lending: Substitute or complement?

Type of the article: Research ArticleAbstractOne of the fundamental functions of commercial banks is providing credit to the public; however, with advancements in digital technology, this function is increasingly being performed by fintech lending companies as well. Accordingly, this study seeks to examine whether the growth of fintech credit in Indonesia acts as a substitute for or a complement to credit extended by commercial banks. The analysis utilizes monthly data from January 2018 to February 2023 and employs the Autoregressive Distributed Lag (ARDL) model to capture both short-run and long-run relationships between fintech lending and bank credit growth. The results indicate that the expansion of fintech credit exerts a positive and significant effect on the growth of bank lending, showing that fintech financing functions as a complement rather than a substitute. An increase in fintech credit is associated with an expansion of bank credit, implying that fintech lending enhances overall financial intermediation by reaching underserved segments and supporting credit distribution through formal banking channels. These findings suggest that fintech development does not crowd out bank lending but instead strengthens Indonesia’s credit ecosystem. The findings offer important guidance for regulators and other stakeholders in formulating suitable policies to respond to the rapid advancement of fintech services. With a balanced regulatory framework, effective oversight, constructive collaboration, and adequate digital infrastructure, Indonesia’s financial ecosystem has the potential for inclusive, efficient, and sustainable financial development.