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Does FinTech curb bank risk-taking? Insights from an emerging economy

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  • Ngo, Xuan Thanh
  • Le, Kim-Anh
  • Nguyen, Thanh Trung
  • Nguyen, Khoa Dang

Abstract

We develop a novel FinTech index based on keyword frequencies in financial reports of Vietnamese commercial banks (2013–2022), capturing dimensions of Data infrastructure, AI & Automation, and Digital banking. Using factor analysis and a two-step System Generalized Method of Moments approach, we find that FinTech development significantly reduces bank risk-taking, especially through cost efficiency improvements. The effects are strongest for small and medium-sized banks and are particularly pronounced in the AI and Data Infrastructure dimensions. Our findings provide new evidence on how digital transformation enhances financial stability in emerging markets.

Suggested Citation

  • Ngo, Xuan Thanh & Le, Kim-Anh & Nguyen, Thanh Trung & Nguyen, Khoa Dang, 2025. "Does FinTech curb bank risk-taking? Insights from an emerging economy," Finance Research Letters, Elsevier, vol. 86(PF).
    • Handle: RePEc:eee:finlet:v:86:y:2025:i:pf:s1544612325019762
    DOI: 10.1016/j.frl.2025.108722
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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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