FinTech and Bank Efficiency in China: Evidence From a Dynamic Network Perspective

This paper examines whether and through which channels financial technology (FinTech) development improves the efficiency of commercial banks. We adopt a meso‐level perspective by measuring external FinTech exposure with two complementary indicators: industry‐level innovation intensity (FinTech‐related Bank Technology Development Awards) and region‐level digital development (municipality digitalization index). Bank efficiency is estimated using a dynamic network slacks‐based measure DEA (SBM‐DNDEA) framework that opens the banking “black box” by modeling deposit‐generation and profit‐creation stages jointly over time. Using panel data on Chinese commercial banks from 2011 to 2021, we find that FinTech development significantly increases overall efficiency and improves performance in both stages. Instrumental‐variable and system‐GMM estimates for DFI provide additional evidence that the regional FinTech results are robust to endogeneity concerns. Mechanism tests show that FinTech raises efficiency through stronger risk‐bearing capacity and better management‐level cost control. Further analysis indicates that the effects are concentrated in small and medium‐sized banks and non‐state‐owned banks. Overall, our findings showcase that FinTech‐driven technological spillovers are an important source of bank efficiency gains.