Fintech and the NPL Provisioning Coverage Ratio: Facilitating or Inhibiting

Fintech has become a crucial driver of technological and business model innovation in modern commercial banking. With its widespread adoption, the impact of fintech on banks' risk management, particularly on the non-performing loan (NPL) provision coverage ratio, has garnered significant attention in both academic and industry circles. Using microdata from 42 listed commercial banks in China's A-share market between 2007 and 2022, this study constructs a theoretical and econometric model to examine this relationship. The findings reveal three key insights: first, fintech significantly suppresses the NPL provision coverage ratio. Second, fintech indirectly promotes risk-taking in China's banking sector by affecting leverage. Third, weighted net risky assets have a negative moderating effect on the relationship between fintech and the NPL provision coverage ratio. These findings offer valuable implications for commercial banks in strategically deploying fintech to prevent and mitigate NPL risks, improve operational performance, and achieve sustainable high-quality growth.