Impact of Financial Digitalization on Organizational Performance

Abstract

Digitalization profoundly affects organizational performance, especially in the financial industry, by disrupting established business models and providing new opportunities for value creation. The combination of advanced internet technology and financial services—namely financial technology (fintech)—has become the most inflammatory component of financial digitalization. However, there is limited knowledge in academia about the effect of fintech on traditional financial intermediation. Using panel data of China's bank sector from 2013 to 2019, the researchers found that financial digitalization is negatively associated with the performance of banks. In addition, further research on the moderating effect shows that the monetary policy easing cycle, the high financial friction environment, and the risk-taking preference of banks could mitigate the negative effect of fintech development on bank performance. These findings contribute to the literature on financial digitization and traditional financial intermediation and have implications for banking practitioners and regulators.