Sustainability of Banks’ Financial Technology and Inclusive Finance - Microscopic Evidence for Financial Enhancement Effect, a paper co-authored by our school’s Managing Director and Professor Li Jianjun and PhD student Jiang Shichao, was published in the 2021 3rd Issue of China Economic Quarterly, an AA-rated prestigious journal.
On the basis of theoretical deduction that the traditional inclusive finance model imposes a negative incentive on commercial banks and that financial technology improves banks’ performance mechanism, this paper uses the county-level panel data of a major state-owned commercial bank to examine it. The paper has the following empirical findings: (1) The business development model of combining financial technology with banks’ traditional financial services can not only increase the inclusiveness of such services and proves to be sustainable. The rationale for banks to employ financial technology to improve their performance lies in that: its effect on banks’ financial performance complies with the law of increasing marginal returns and diminishing marginal cost, and it can help expand the deposit and loan business of banks. (2) The development of financial technology increases the overall scale of deposits and loans and widens the business growth space of banks. (3)Taking the perspective of different types of FinTech,, in counties where online payment, funds, insurance and foreign exchange (among others) are prevalent, FinTech plays a visible role in promoting banks’ financial profitability and lowering their operating costs. (4) Traditional inclusive financial services represented by outlets, self-service banks and intelligent payment terminals fail to improve banks’ performance significantly, or even affect it negatively. In the early development stage of financial technology, physical outlets played an important role in supporting its development.
The conclusion reached herein provides a basis for commercial banks to develop inclusive finance and enhance their performance by firmly utilizing financial technology. The authors also make suggestions on how commercial banks can promote the development of financial technology: (1) vigorously promote intelligent and lightness-oriented transformation, fill the absence of physical outlets in remote areas through the development of financial technology, and fulfill the target of lowering costs and boosting efficiency; (2) exert the advantages of financial technology in channel and specialty, enhance service capabilities, develop inclusive financial products, respond to customers’ diversified financial needs, and pay attention to financial technology service products that can increase financial profitability and reduce operating costs; (3) strengthen risk management in respect of data, model and product.
