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Bank efficiency in the digital age: The role of financial technology in Tanzanian banks

Author

Listed:
  • Omary Juma Ally

  • Yusuph Kulindwa

  • Lucas Mataba

Abstract

The global rise of financial technology offers opportunities and challenges for banking businesses, including Tanzanian banks. This study examines the influence of a bank's FinTech index on the efficiency of 30 Tanzanian commercial banks categorized as large, medium, and small from 2010–2021. Using panel data and a two-step Generalized Method of Moments (GMM) estimator, the study finds that the FinTech index measuring banks' financial technology development significantly enhances efficiency across all banks, with the largest impact on large banks due to their high financial technology development. However, medium and small banks face challenges in financial technology development, resulting in a negative relationship between the FinTech index and the efficiency of banks. The study emphasizes the need for regulatory frameworks supporting financial technology integration in the core banking systems, especially for smaller and medium banks. It highlights the importance of collaboration and risk management to enhance bank efficiency and financial stability.

Suggested Citation

  • Omary Juma Ally & Yusuph Kulindwa & Lucas Mataba, 2025. "Bank efficiency in the digital age: The role of financial technology in Tanzanian banks," Modern Finance, Modern Finance Institute, vol. 3(1), pages 1-24.
    • Handle: RePEc:bdy:modfin:v:3:y:2025:i:1:p:1-24:id:218
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    References listed on IDEAS

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    Cited by:

    1. Khalil M. A. Almuayad & Chen You zhen, 2026. "Impact of Knowledge Management on Bank Performance of Yemeni Banks: The Mediating Role of FinTech Innovation," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 17(2), pages 5384-5405, April.
    2. Viktoriia Stoika & Konrad Rojek, 2025. "The Impact of Digitalization on Banks' Capital: A Case Study of Poland," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 1092-1103.

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