The impact of bank FinTech on commercial banks' risk-taking in China

FinTech has facilitated the digital transformation of commercial banks, but it has also impacted their micro-risktaking. This paper investigates the relationship between bank FinTech and micro-risks of commercial banks, including credit, liquidity, and insolvency risks. To overcome the shortcomings of the existing measurements of bank FinTech, this paper establishes an index that covers 148 commercial banks based on their annual financial reports from 2007 to 2019 by using text mining. In addition, this work discusses the heterogeneity of ownership and influence channels. The following conclusions emerge: (1) innovation and the application of bank FinTech increase bank credit and liquidity risks but reduce insolvency risk; (2) Considering ownerships, bank FinTech in state-owned commercial banks enables credit risk to be controlled effectively, whereas it in joint-stock commercial banks brings higher liquidity risk and lower insolvency risk. (3) Technological application in bank FinTech can help banks to reduce insolvency risk, while business innovation in bank FinTech can exacerbate liquidity risk. This paper adds theoretical and empirical evidence on the role of FinTech in banks' risk-taking. And it concludes with recommendations for banking regulation and the development of commercial banks.