How Fintech Affects Systemic Financial Risk - Evidence from Chinese Commercial Banks

Against the backdrop of the rapid development of fintech, digital transformation has become an important tool for the banking industry to deal with systemic financial risks. Taking Chinese commercial banks as the research object, this paper explores how FinTech affects systemic financial risk, especially its role on non-performing loan (NPL) ratio. Through heterogeneity tests and main regression analyses, the paper examines the specific impact of the total digitisation index and its subdimensions (strategic digitisation, operational digitisation, and managerial digitisation) on the NPL ratio. The findings show that banks' digital transformation significantly reduces the NPL rate, and in particular, strategic digitisation has the most prominent effect in reducing credit risk. In addition, digital transformation further reduces credit risk by improving the stability of loan growth rates and deposit growth rates. The research in this paper provides important practical guidance for the banking industry on how to effectively use fintech to control systemic financial risks in the process of promoting digital transformation, and provides a theoretical basis for the formulation of relevant policies.