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Differential Impact of Fintech and GDP on Bank Performance: Global Evidence

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  • Soon Suk Yoon

    (School of Accounting, Finance, Economics, and Decision Sciences, College of Business and Technology, Western Illinois University, 1 University Circle, Macomb, IL 61455, USA)

  • Hongbok Lee

    (School of Accounting, Finance, Economics, and Decision Sciences, College of Business and Technology, Western Illinois University, 1 University Circle, Macomb, IL 61455, USA)

  • Ingyu Oh

    (College of Global Engagement, Kansai Gaidai University, Osaka 573-1001, Japan
    International Centre for Organization & Innovation Studies, Singapore 518152, Singapore
    Asia Pacific Business Review, London SW1P 1WG, UK)

Abstract

Using the World Bank Global Findex Database for 91 countries in 2014, 2017, and 2021, we examine whether fintech levels influence bank performance and whether fintech’s interaction with GDP per capita causes differential effects on bank performance globally. Since fintech levels were already very high for rich countries when the World Bank started providing fintech development statistics in 2014, we estimate AbFintech by regressing fintech levels on GDP per capita by year. AbFintech is the difference between the fintech level and its fitted values. Then, using multiple regression analyses, we investigate the impact of AbFintech on bank performance worldwide, focusing on the differential effects of AbFintech and GDP levels on bank performance. We find AbFintech significantly increases bank performance, primarily in less developed countries. Specifically, AbFintech increases banks’ ROA in the least developed countries and net interest margin in 75th percentile countries. Also, AbFintech decreases the cost-to-income ratio in 75th percentile countries, while it increases the ratio in the most developed countries. The resulting policy implication is that banks in less developed countries benefit most from investing in fintech innovation since they can provide a broader customer base, including formerly unbanked or underbanked customers, with more convenient services at lower costs.

Suggested Citation

  • Soon Suk Yoon & Hongbok Lee & Ingyu Oh, 2023. "Differential Impact of Fintech and GDP on Bank Performance: Global Evidence," JRFM, MDPI, vol. 16(7), pages 1-17, June.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:7:p:304-:d:1176344
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    References listed on IDEAS

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