The Profit Impact of Internet Finance on Commercial Bank in China

Considering the rapid expansion of Internet finance, governments and regulatory authorities across various nations have implemented new policies to regulate the development of this burgeoning sector while mitigating potential systemic risks. These policies foster financial innovation, ensure stability, and promote fair competition within the financial market. This paper investigates the effects of newly instituted Internet finance regulations on the profitability of commercial banks through a comparative analysis utilizing key Chinese commercial indicators such as Return on Equity (ROE), Return on Assets (ROA), and Net Interest Margin (NIM), alongside metrics related to internet penetration, substitution effects, policy influence factors, macroeconomic indicators, and five major stock indices. The findings reveal that these recently introduced Internet finance policies significantly impact commercial bank profitability. Specifically, they regulate behaviors associated with Internet finance, mitigate market risks, and indirectly influence both competitiveness and profit models within traditional banking institutions. On the one hand, stringent enforcement of these regulations has provided some protection for conventional banking operations, thereby enhancing their profitability; conversely, increased compliance costs coupled with shifts in the market environment have adversely affected operational efficiency and overall bank profitability. This study offers a novel perspective for understanding the dual implications of new policies on commercial bank profitability in an era characterized by Internet finance while providing valuable empirical insights for policymakers striving to balance financial innovation with market stability. Additionally, it presents practical recommendations for commercial banks regarding strategic adjustments necessary to navigate increasingly complex competitive landscapes under evolving policy frameworks.