IDEAS home Printed from https://ideas.repec.org/a/gam/jfinte/v4y2025i3p41-d1722989.html
   My bibliography  Save this article

Financial Technology and Chinese Commercial Banks’ Overall Profitability: A “U-Shaped” Relationship

Author

Listed:
  • Xue Yuan

    (Faculty of Economics and Business, Universiti Malaysia Sarawak, Kota Samarahan 94300, Sarawak, Malaysia
    School of International Economics, Anhui International Studies University, Hefei 231201, China)

  • Chin-Hong Puah

    (Faculty of Economics and Business, Universiti Malaysia Sarawak, Kota Samarahan 94300, Sarawak, Malaysia)

  • Dayang Affizzah binti Awang Marikan

    (Faculty of Economics and Business, Universiti Malaysia Sarawak, Kota Samarahan 94300, Sarawak, Malaysia)

Abstract

The comprehensive integration of modern technologies, such as artificial intelligence and big data, into the financial sector in recent years has profoundly transformed the operating model of the traditional financial industry. These technologies not only redefine the operating mechanisms of the financial industry but also significantly reshape the competitive landscape and strategic development of commercial banks. To investigate the impact of FinTech on the overall profitability of commercial banks, this study utilizes a balanced panel dataset comprising 50 listed commercial banks in China from 2012 to 2023 and conducts an empirical analysis based on a fixed-effects model. The findings reveal that, from a dynamic perspective, there exists a significant U-shaped relationship between FinTech and the comprehensive profitability of commercial banks, with a development threshold of 2.86. When the level of FinTech development falls below this critical threshold, its impact on the profitability of commercial banks is predominantly negative. However, once FinTech development surpasses this threshold, its positive effects on enhancing the profitability of commercial banks gradually emerge. Therefore, the government should provide phased policy support to achieve both short-term burden reduction and long-term innovation, and commercial banks should adopt FinTech development as a long-term strategic priority.

Suggested Citation

  • Xue Yuan & Chin-Hong Puah & Dayang Affizzah binti Awang Marikan, 2025. "Financial Technology and Chinese Commercial Banks’ Overall Profitability: A “U-Shaped” Relationship," FinTech, MDPI, vol. 4(3), pages 1-20, August.
    • Handle: RePEc:gam:jfinte:v:4:y:2025:i:3:p:41-:d:1722989
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2674-1032/4/3/41/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2674-1032/4/3/41/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Xiaoling Song & Huizhi Yu & Zehai He, 2023. "Heterogeneous Impact of Fintech on the Profitability of Commercial Banks: Competition and Spillover Effects," JRFM, MDPI, vol. 16(11), pages 1-17, November.
    2. Tong, Xiao & Yang, Wang, 2025. "Empirical analysis of the impact of financial technology on the profitability of listed banks," International Review of Economics & Finance, Elsevier, vol. 98(C).
    3. Zhang, Yujin & Ye, Shujun & Liu, Jie & Du, Lihong, 2023. "Impact of the development of FinTech by commercial banks on bank credit risk," Finance Research Letters, Elsevier, vol. 55(PA).
    4. Yueyao Wang & Xintong Yu & Qingyuan Yao & Yingnan Lu & Wenjia Che & Jingang Jiang & Sonia Chien-I Chen, 2024. "Assessing the Impact of Financial Technology Innovations on the Sustainable Profitability of Listed Commercial Banks in China," FinTech, MDPI, vol. 3(3), pages 1-12, July.
    5. Karim, Sitara & Lucey, Brian M., 2024. "BigTech, FinTech, and banks: A tangle or unity?," Finance Research Letters, Elsevier, vol. 64(C).
    6. Cheng, Maoyong & Qu, Yang, 2020. "Does bank FinTech reduce credit risk? Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 63(C).
    7. Lee, Chien-Chiang & Ni, Wenjie & Zhang, Xiaoming, 2023. "FinTech development and commercial bank efficiency in China," Global Finance Journal, Elsevier, vol. 57(C).
    8. Qian Chen & Chuang Shen, 2024. "How FinTech Affects Bank Systemic Risk: Evidence from China," Journal of Financial Services Research, Springer;Western Finance Association, vol. 65(1), pages 77-101, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chen, Xiaojie & He, Guangwen & Li, Qian, 2024. "Can Fintech development improve the financial inclusion of village and township banks? Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 85(C).
    2. Khan, Habib Hussain & Kutan, Ali M. & Qureshi, Fiza, 2024. "Fintech integration: Driving efficiency in banking institutions across the developing nations," Finance Research Letters, Elsevier, vol. 67(PA).
    3. Abdullah, Mohammad & Chowdhury, Mohammad Ashraful Ferdous & Wali Ullah, G.M., 2025. "Asymmetric tail risk dynamics, efficiency and risk spillover among FinTech stocks, cryptocurrencies and traditional assets," Global Finance Journal, Elsevier, vol. 64(C).
    4. Fan, Chenguang & Bae, Seongho & Liu, Yu, 2024. "Can FinTech transform corporate liquidity? Evidence from China," Innovation and Green Development, Elsevier, vol. 3(2).
    5. Nam Thanh Vu & Hung Quang Bui & Tuan Anh Pham & Duc Hong Vo, 2024. "Fintech development and environmental sustainability: Does income inequality matter?," Australian Economic Papers, Wiley Blackwell, vol. 63(2), pages 350-369, June.
    6. Li, Chengyou & Li, Yuxin & Xu, Yun & Sun, Guanglin, 2025. "Research on the impact of financial technology on risk-taking of commercial banks," Research in International Business and Finance, Elsevier, vol. 76(C).
    7. Minglong Xian, 2024. "Impact of Inclusive Growth, Environmental Policy Incentives, Fintech and Globalization on Environmental Sustainability in G20 Countries," Sustainability, MDPI, vol. 17(1), pages 1-26, December.
    8. Xiaoming Zhang & Wenzhe Zhang & Chien‐Chiang Lee, 2025. "Bank leverage and systemic risk: Impact of bank risk‐taking and inter‐bank business," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 30(2), pages 1450-1474, April.
    9. Li, Yuchun & Zhang, Tianhao & Tao, Yangzi & Wu, Ling, 2025. "Technology-based boards and bank operational efficiency: Mediating effects of risk-taking," Finance Research Letters, Elsevier, vol. 76(C).
    10. Liu, Xiaojing & Tian, Haiyan & Leng, Ziwen & Ma, Yue, 2025. "Financial technology, financing constraints, and future industrial development," Finance Research Letters, Elsevier, vol. 73(C).
    11. Nourallah, Mustafa & Öhman, Peter & Hamati, Samer, 2024. "Financial technology and financial capability: Study of the European Union," Global Finance Journal, Elsevier, vol. 62(C).
    12. Shi, Zhengxu & Xia, Yufei & He, Lingyun & Sun, Naili & Zheng, Qiong, 2025. "Can internal regulatory technology (RegTech) mitigate bank credit risk? Evidence from the banking sector in China," Research in International Business and Finance, Elsevier, vol. 75(C).
    13. Liu, Chengcheng & Tian, Meng & Huang, Bai, 2025. "Volatility spillover dynamics between fintech and traditional financial industries and their rich determinants: New evidence from Chinese listed institutions," International Review of Financial Analysis, Elsevier, vol. 101(C).
    14. Ari Warokka & Aris Setiawan & Aina Zatil Aqmar, 2025. "Key Factors Influencing Fintech Development in ASEAN-4 Countries: A Mediation Analysis," FinTech, MDPI, vol. 4(2), pages 1-19, April.
    15. You, Wei & Liu, Bojing, 2025. "ESG performance, bank fintech and risk-taking," Finance Research Letters, Elsevier, vol. 74(C).
    16. Sirui Wu & Haowen Tian & Ela Aden, 2025. "Bank Digitalization and Capital Reallocation," Journal of Business Ethics, Springer, vol. 199(3), pages 583-601, July.
    17. Zhang, Yujin & Ye, Shujun & Liu, Jie & Zhang, Lulu & Li, Jiayi, 2025. "Can digital transformation of commercial banks reduce green credit risks?," International Review of Financial Analysis, Elsevier, vol. 99(C).
    18. Lee, Chien-Chiang & Xiao, Qian & Zhang, Xiaoming, 2025. "Green credit and systemic risk: From the perspectives of policy and scale," The North American Journal of Economics and Finance, Elsevier, vol. 77(C).
    19. Wu, Wenyang & Tang, Shenfeng, 2024. "Bank credit in the digital age: Expansion or excessive expansion?," Finance Research Letters, Elsevier, vol. 70(C).
    20. Hang Gao, 2024. "The effects of financial spatial structure on household financial vulnerability: Evidence from China," PLOS ONE, Public Library of Science, vol. 19(11), pages 1-24, November.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jfinte:v:4:y:2025:i:3:p:41-:d:1722989. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.