How does FinTech affect the efficiency of non-performing loans? Evidence from China

Purpose This study aims to examine the impact of FinTech innovation (FinTech) on the non-performing loan efficiency (ENPL). Design/methodology/approach The paper explores the non-linear inverted U-shaped relationship between the level of FinTech innovation and ENPL, analyzes the heterogeneity of the inflection point influenced by agriculture-related loans and investigates the dual roles of financial development and decentralization through FinTech. Findings FinTech enhances ENPL below a critical inflection point, aiding in risk prevention and economic growth; above this point, however, it diminishes efficiency. This inflection point varies, lowering with an increase in agriculture-related loans. Moreover, while FinTech’s influence through financial development boosts efficiency, its effect via financial decentralization reduces it. Practical implications This study demonstrates that FinTech adoption can significantly improve ENPL up to a certain threshold. Beyond this point, however, further innovation may reduce efficiency. These findings offer practical implications for policymakers and financial institutions, suggesting that strategic, moderated adoption of FinTech can optimize non-performing loan management and contribute to greater financial stability. Originality/value This study sheds light on the dynamics between FinTech and ENPL, revealing its non-linear, heterogeneous impacts and the dual effects on financial outcomes, providing novel insights into the sector’s operation.