IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2511.02608.html

How FinTech affects financial sustainability: Evidence from Chinese commercial banks using a three-stage network DEA-Malmquist model

Author

Listed:
  • Yudi Yang
  • Fan Yang
  • Xiajie Yi
  • Dongwei He

Abstract

This paper investigates the impact of financial technology (FinTech) on the financial sustainability (FS) of commercial banks. We employ a three-stage network DEA-Malmquist model to evaluate the FS performance of 104 Chinese commercial banks from 2015 to 2023. A two-way fixed effects model is utilized to examine the effects of FinTech on FS, revealing a significant negative relationship. Further mechanistic analysis indicates that FinTech primarily undermines FS by eroding banks' loan efficiency and profitability. Notably, banks with more patents or listed status demonstrate greater resilience to FinTech disruptions. These findings help banks identify external risks stemming from FinTech development, and by elucidating the mechanisms underlying FS, enhance their capacity to monitor and manage FS in the era of rapid FinTech advancement.

Suggested Citation

  • Yudi Yang & Fan Yang & Xiajie Yi & Dongwei He, 2025. "How FinTech affects financial sustainability: Evidence from Chinese commercial banks using a three-stage network DEA-Malmquist model," Papers 2511.02608, arXiv.org.
    • Handle: RePEc:arx:papers:2511.02608
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2511.02608
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Elnahass, Marwa & Trinh, Vu Quang & Li, Teng, 2021. "Global banking stability in the shadow of Covid-19 outbreak," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 72(C).
    2. Thakor, Anjan, 2020. "Corrigendum to: Fintech and Banking: What Do We Know?," Journal of Financial Intermediation, Elsevier, vol. 43(C).
    3. Zeller, Manfred & Meyer, Richard L., 2002. "The triangle of microfinance: financial sustainability, outreach, and impact," Food policy statements 40, International Food Policy Research Institute (IFPRI).
    4. Li, Xingchen & Xu, Guangcheng & Wu, Jie & Xu, Chengzhen & Zhu, Qingyuan, 2024. "Evaluation of bank efficiency by considering the uncertainty of nonperforming loans," Omega, Elsevier, vol. 126(C).
    5. Hao Liang & Luc Renneboog, 2017. "On the Foundations of Corporate Social Responsibility," Journal of Finance, American Finance Association, vol. 72(2), pages 853-910, April.
    6. Cheng, Maoyong & Qu, Yang, 2020. "Does bank FinTech reduce credit risk? Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 63(C).
    7. Jaffry, Shabbar & Ghulam, Yaseen & Pascoe, Sean & Cox, Joe, 2007. "Regulatory changes and productivity of the banking sector in the Indian sub-continent," Journal of Asian Economics, Elsevier, vol. 18(3), pages 415-438, June.
    8. Lee, Chien-Chiang & Ni, Wenjie & Zhang, Xiaoming, 2023. "FinTech development and commercial bank efficiency in China," Global Finance Journal, Elsevier, vol. 57(C).
    9. Casu, Barbara & Girardone, Claudia & Molyneux, Philip, 2004. "Productivity change in European banking: A comparison of parametric and non-parametric approaches," Journal of Banking & Finance, Elsevier, vol. 28(10), pages 2521-2540, October.
    10. Cook, Wade D. & Zhu, Joe & Bi, Gongbing & Yang, Feng, 2010. "Network DEA: Additive efficiency decomposition," European Journal of Operational Research, Elsevier, vol. 207(2), pages 1122-1129, December.
    11. Fukuyama, Hirofumi & Matousek, Roman & Tzeremes, Nickolaos G., 2020. "A Nerlovian cost inefficiency two-stage DEA model for modeling banks’ production process: Evidence from the Turkish banking system," Omega, Elsevier, vol. 95(C).
    12. Rui Wang & Jiangtao Liu & Hang(Robin) Luo, 2021. "Fintech development and bank risk taking in China," The European Journal of Finance, Taylor & Francis Journals, vol. 27(4-5), pages 397-418, March.
    13. Tyler Wry & Eric Yanfei Zhao, 2018. "Taking Trade-offs Seriously: Examining the Contextually Contingent Relationship Between Social Outreach Intensity and Financial Sustainability in Global Microfinance," Organization Science, INFORMS, vol. 29(3), pages 507-528, June.
    14. 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).
    15. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
    16. Yao, Jianfeng & Fan, Jianfei, 2025. "The impact of policy uncertainty and risk taking on the credit resource allocation of urban commercial banks," International Review of Economics & Finance, Elsevier, vol. 97(C).
    17. Yu Shi & Joe Zhu & Vincent Charles, 2020. "Data science and productivity: A bibliometric review of data science applications and approaches in productivity evaluations," Journal of the Operational Research Society, Taylor & Francis Journals, vol. 72(5), pages 975-988, December.
    18. Lee, Chi-Chuan & Li, Xinrui & Yu, Chin-Hsien & Zhao, Jinsong, 2021. "Does fintech innovation improve bank efficiency? Evidence from China’s banking industry," International Review of Economics & Finance, Elsevier, vol. 74(C), pages 468-483.
    19. Xavier Vives, 2019. "Digital Disruption in Banking," Annual Review of Financial Economics, Annual Reviews, vol. 11(1), pages 243-272, December.
    20. Yu, Ming-Miin & Lin, Chung-I & Chen, Kuan-Chen & Chen, Li-Hsueh, 2021. "Measuring Taiwanese bank performance: A two-system dynamic network data envelopment analysis approach," Omega, Elsevier, vol. 98(C).
    21. Staub, Roberta B. & da Silva e Souza, Geraldo & Tabak, Benjamin M., 2010. "Evolution of bank efficiency in Brazil: A DEA approach," European Journal of Operational Research, Elsevier, vol. 202(1), pages 204-213, April.
    22. Sherman, H. David & Gold, Franklin, 1985. "Bank branch operating efficiency : Evaluation with Data Envelopment Analysis," Journal of Banking & Finance, Elsevier, vol. 9(2), pages 297-315, June.
    23. Bos, Jaap W.B. & Kolari, James W. & van Lamoen, Ryan C.R., 2013. "Competition and innovation: Evidence from financial services," Journal of Banking & Finance, Elsevier, vol. 37(5), pages 1590-1601.
    24. Shi, Yu & Charles, Vincent & Zhu, Joe, 2025. "Bank financial sustainability evaluation: Data envelopment analysis with random forest and Shapley additive explanations," European Journal of Operational Research, Elsevier, vol. 321(2), pages 614-630.
    25. Dobdinga Cletus Fonchamnyo & Tony Anyangwe & Ndichia Nana Chantal & Gildas Dohba Dinga, 2023. "Capital structure and financial sustainability: stakes of microfinance institutions in Bamenda, Cameroon," Future Business Journal, Springer, vol. 9(1), pages 1-10, December.
    26. Portela, Maria C.A.S. & Thanassoulis, Emmanuel, 2010. "Malmquist-type indices in the presence of negative data: An application to bank branches," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1472-1483, July.
    27. Jeffrey M. Wooldridge, 2015. "Control Function Methods in Applied Econometrics," Journal of Human Resources, University of Wisconsin Press, vol. 50(2), pages 420-445.
    28. Akhtaruzzaman, Md & Boubaker, Sabri & Goodell, John W., 2023. "Did the collapse of Silicon Valley Bank catalyze financial contagion?," Finance Research Letters, Elsevier, vol. 56(C).
    29. Caves, Douglas W & Christensen, Laurits R & Diewert, W Erwin, 1982. "The Economic Theory of Index Numbers and the Measurement of Input, Output, and Productivity," Econometrica, Econometric Society, vol. 50(6), pages 1393-1414, November.
    30. Debao Hu & Sibo Zhao & Fujun Yang, 2024. "Will fintech development increase commercial banks risk-taking? Evidence from China," Electronic Commerce Research, Springer, vol. 24(1), pages 37-67, March.
    31. Andrew Metrick, 2024. "The Failure of Silicon Valley Bank and the Panic of 2023," Journal of Economic Perspectives, American Economic Association, vol. 38(1), pages 133-152, Winter.
    32. Avkiran, Necmi Kemal, 2015. "An illustration of dynamic network DEA in commercial banking including robustness tests," Omega, Elsevier, vol. 55(C), pages 141-150.
    33. Wang, Ke & Huang, Wei & Wu, Jie & Liu, Ying-Nan, 2014. "Efficiency measures of the Chinese commercial banking system using an additive two-stage DEA," Omega, Elsevier, vol. 44(C), pages 5-20.
    34. Pooja Bansal & Aparna Mehra & Sunil Kumar, 2022. "Dynamic Metafrontier Malmquist–Luenberger Productivity Index in Network DEA: An Application to Banking Data," Computational Economics, Springer;Society for Computational Economics, vol. 59(1), pages 297-324, January.
    35. Diego Prior & Emili Tortosa-Ausina & María Pilar García-Alcober & Manuel Illueca, 2019. "Profit efficiency and earnings quality: Evidence from the Spanish banking industry," Journal of Productivity Analysis, Springer, vol. 51(2), pages 153-174, June.
    36. Buchak, Greg & Matvos, Gregor & Piskorski, Tomasz & Seru, Amit, 2018. "Fintech, regulatory arbitrage, and the rise of shadow banks," Journal of Financial Economics, Elsevier, vol. 130(3), pages 453-483.
    37. Beccalli, Elena & Anolli, Mario & Borello, Giuliana, 2015. "Are European banks too big? Evidence on economies of scale," Journal of Banking & Finance, Elsevier, vol. 58(C), pages 232-246.
    38. Sealey, Calvin W, Jr & Lindley, James T, 1977. "Inputs, Outputs, and a Theory of Production and Cost at Depository Financial Institutions," Journal of Finance, American Finance Association, vol. 32(4), pages 1251-1266, September.
    39. Najam, Hina & Abbas, Jawad & Álvarez-Otero, Susana & Dogan, Eyup & Sial, Muhammad Safdar, 2022. "Towards green recovery: Can banks achieve financial sustainability through income diversification in ASEAN countries?," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 522-533.
    40. Fare, Rolf & Shawna Grosskopf & Mary Norris & Zhongyang Zhang, 1994. "Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries," American Economic Review, American Economic Association, vol. 84(1), pages 66-83, March.
    41. Rowland Seyram Koku Dabi & Nugraha & Disman & Maya Sari, 2023. "Capital structure, financial performance and sustainability of Microfinance Institutions (MFIs) in Ghana," Cogent Economics & Finance, Taylor & Francis Journals, vol. 11(2), pages 2230013-223, June.
    42. Zhang, Yue-Jun & Liang, Ting & Jin, Yan-Lin & Shen, Bo, 2020. "The impact of carbon trading on economic output and carbon emissions reduction in China’s industrial sectors," Applied Energy, Elsevier, vol. 260(C).
    43. Li, Linwen & Gao, Wei & Gu, Wanhong, 2023. "Fintech, bank concentration and commercial bank profitability: Evidence from Chinese urban commercial banks," Finance Research Letters, Elsevier, vol. 57(C).
    44. Matthews, Kent, 2013. "Risk management and managerial efficiency in Chinese banks: A network DEA framework," Omega, Elsevier, vol. 41(2), pages 207-215.
    45. Jeffrey M Wooldridge, 2010. "Econometric Analysis of Cross Section and Panel Data," MIT Press Books, The MIT Press, edition 2, volume 1, number 0262232588, December.
    46. Barros, Carlos Pestana & Managi, Shunsuke & Matousek, Roman, 2009. "Productivity growth and biased technological change: Credit banks in Japan," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(5), pages 924-936, December.
    47. Rami Abu Wadi & Ala’ Bashayreh & Lubna Khalaf & Samer Abdelhadi, 2022. "Financial sustainability and outreach in microfinance institutions: evidence from MENA countries," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 12(1), pages 238-250, January.
    48. George Assaf, A. & Matousek, Roman & Tsionas, Efthymios G., 2013. "Turkish bank efficiency: Bayesian estimation with undesirable outputs," Journal of Banking & Finance, Elsevier, vol. 37(2), pages 506-517.
    49. Sebastian Kohl & Jan Schoenfelder & Andreas Fügener & Jens O. Brunner, 2019. "The use of Data Envelopment Analysis (DEA) in healthcare with a focus on hospitals," Health Care Management Science, Springer, vol. 22(2), pages 245-286, June.
    50. George J. Benston, 1965. "Branch Banking And Economies Of Scale," Journal of Finance, American Finance Association, vol. 20(2), pages 312-331, May.
    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. Dan Li & Yanfeng Li & Yeming Gong & Jiawei Yang, 2021. "Estimation of bank performance from multiple perspectives: an alternative solution to the deposit dilemma," Journal of Productivity Analysis, Springer, vol. 56(2), pages 151-170, December.
    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. Shi, Yu & Charles, Vincent & Zhu, Joe, 2025. "Bank financial sustainability evaluation: Data envelopment analysis with random forest and Shapley additive explanations," European Journal of Operational Research, Elsevier, vol. 321(2), pages 614-630.
    4. Zhang, Xudong & Li, Zhihui, 2025. "FinTech: The disruptive force reducing bank competition pressure," Emerging Markets Review, Elsevier, vol. 65(C).
    5. Vaneet Bhatia & Sankarshan Basu & Subrata Kumar Mitra & Pradyumna Dash, 2018. "A review of bank efficiency and productivity," OPSEARCH, Springer;Operational Research Society of India, vol. 55(3), pages 557-600, November.
    6. Sabri Boubaker & Tu D. Q. Le & Riadh Manita & Thanh Ngo, 2025. "Balancing bank profits and nonperforming loans: a multiple objective programming approach," Annals of Operations Research, Springer, vol. 346(2), pages 839-860, March.
    7. 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).
    8. Changzheng Zhang & Yuchao Wang & Yanbing Zhang, 2025. "Can digital transformation improve commercial banks’ performance?," The Journal of Technology Transfer, Springer, vol. 50(4), pages 1341-1362, August.
    9. Dipasha Sharma & Anil K. Sharma, 2015. "Influence of Turbulent Macroeconomic Environment on Productivity Change of Banking Sector: Empirical Evidence from India," Global Business Review, International Management Institute, vol. 16(3), pages 439-462, June.
    10. Guo, Pin & Zhang, Cheng, 2023. "The impact of bank FinTech on liquidity creation: Evidence from China," Research in International Business and Finance, Elsevier, vol. 64(C).
    11. 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).
    12. Zhao, Yang & Goodell, John W. & Wang, Yong & Abedin, Mohammad Zoynul, 2023. "Fintech, macroprudential policies and bank risk: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 87(C).
    13. Pooja Bansal & Aparna Mehra & Sunil Kumar, 2022. "Dynamic Metafrontier Malmquist–Luenberger Productivity Index in Network DEA: An Application to Banking Data," Computational Economics, Springer;Society for Computational Economics, vol. 59(1), pages 297-324, January.
    14. Mai, Nhat Chi, 2015. "Efficiency of the banking system in Vietnam under financial liberalization," OSF Preprints qsf6d, Center for Open Science.
    15. Cuadros-Solas, Pedro J. & Cubillas, Elena & Salvador, Carlos & Suárez, Nuria, 2024. "Digital disruptors at the gate. Does FinTech lending affect bank market power and stability?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 92(C).
    16. Riyanka Baral & Debasis Patnaik, 2023. "Bank efficiency and governance: Evidence from Indian banking," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 27(3), pages 957-985, September.
    17. Fadzlan Sufian & Fakarudin Kamarudin, 2017. "Forced Mergers on Bank Efficiency and Productivity: Evidence from Semi-parametric Malmquist Productivity Index," Global Business Review, International Management Institute, vol. 18(1), pages 19-44, February.
    18. Idaira Cabrera-Suárez & Jorge V. Pérez-Rodríguez & Simón Sosvilla-Rivero, 2025. "Correction: Financial restructuring, crisis, and productivity growth in bank branches: evidence from a large commercial Spanish bank," International Economics and Economic Policy, Springer, vol. 22(4), pages 1-2, October.
    19. Hu, Mingya & Zhang, Yongjie & Feng, Xu & Xiong, Xiong, 2024. "How technological innovation influence operational risk: Evidence from banks in China," International Review of Financial Analysis, Elsevier, vol. 95(PB).
    20. Tien Phat Pham & Drahomira Pavelkova & Boris Popesko & Sinh Duc Hoang & Hoc Thai Huynh, 2024. "Relationship between fintech by Google search and bank stock return: a case study of Vietnam," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-25, December.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:arx:papers:2511.02608. 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: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    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.