FinTech effect: measuring impact of FinTech adoption on banks' profitability

Financial technology (FinTech) is an evolving concept that has previously produced little historical evidence or statistically significant time series data for analysis, leaving only a theoretical framework to be worked on or sponsored by large advisory firms. Strategic advisory firms have already put the emerging FinTech trend at the top of their agendas, with the aim of better understanding future scenarios for universal banks. There has been abundant theoretical literature existing on the implication of emerging FinTech globally, but there is still a dither in quantitative analysis. This study aims to understand the impact of financial technology implementation on the profitability of Indian banks. The study considers return on assets (ROAs) and return on equity (ROE) as dependent variables, and independent variables include number of ATMs to bank branches ratio, capital equity tier 1 ratio, cost to income ratio and FinTech dummy (encompasses blockchain, artificial intelligence, robotic process automation, payment technology, and cloud computing). The results display a significant positive impact of FinTech adoption on banks' profitability. Financial institutions delivering tailored products and services, successful in combining pace and flexibility, are having far more wide-reaching dynamics in comparison to their antiquated predecessors.