Does FinTech security matter for the stability of commercial banks?

This study explores the impact of FinTech security on the stability of commercial banks. In contrast to existing research that exclusively concentrates on the effects of FinTech adoption, this article makes an innovative contribution by underscoring the significance of FinTech security for the banking sector, thus advancing the frontier of research on FinTech quality. We leverage the introduction of China’s FinTech product security certification policy as an exogenous shock and employ a multi-period Difference-in-Differences (DID) model to conduct an empirical analysis on the relationship between FinTech security and bank stability. Drawing on data from 373 commercial banks in China over the period from 2014 to 2023, our results reveal that banks possessing valid FinTech product security certification certificates demonstrate greater stability. This finding underscores that FinTech security is a pivotal factor in bolstering bank stability. Mechanism analysis further reveals that enhancing FinTech security can reinforce customer trust and mitigate regulatory pressure, which in turn contributes to heightened bank stability. The outcomes of heterogeneity analysis indicate that small and medium-sized banks, as well as banks with comparatively weaker FinTech capabilities, ought to accord greater priority to FinTech security.