Does Indian banks’ FinTech investment affect their liquidity and efficiency? Using competition functions as a moderator

Purpose FinTech technologies are distinct because they are used to develop and provide traditional financial services. This study aims to investigate how FinTech advances affect Indian banks’ efficiency and liquidity. In addition to analyzing its role in promoting financial inclusion, reducing risks and generating competitive advantages in the banking industry, it looks into how FinTech adoption improves efficiency, strengthens liquidity and works under the competition inside the Indian banking industry. Design/methodology/approach In this study, 23 Indian banks serve as cross-sectional units, and the time dimension spans 15 years, from 2010 to 2024. Panel data analysis was also used to examine the findings. Findings According to this study, Indian banks’ short-term liquidity (liquidity coverage ratio [LCR]) and FinTech investment (information, communication and technology [ICT]) are positively correlated. Interestingly, ICT does not affect long-term liquidity (net stable funding ratio [NSFR]). ICT also increases bank efficiency. On the other hand, li (decrease in competition) modifies these linkages, impacting efficiency and liquidity. Because they put efficiency ahead of pricing rivalry, banks become more efficient and invest more in ICT when there is less competition. However, a moderating effect of li has been shown on the association of LCR and ICT and on the association of ICT and NSFR, which indicates that an increase in li results in a decrease in short-term liquidity and ICT investment by banks and also increases in li results in a reduction of the long-term liquidity (NSFR) and ICT investment by banks. Research limitations/implications This study is constrained by its emphasis on FinTech investment rather than examining more general FinTech innovations and their particular effects on Indian banks, including blockchain or artificial intelligence. Practical implications FinTech investment integration improves efficiency and liquidity in Indian banking, but these advantages can be lessened if competition declines. Banks need to make strategic investments in FinTech to keep their competitive edge. Creating a competitive atmosphere should motivate banks to use FinTech to enhance their efficiency and liquidity management and encourage long-term expansion in the financial industry. Originality/value This study provides fresh perspectives on the strategic role of FinTech in banking by examining how FinTech investment affects Indian banks’ efficiency and liquidity in a unique way while taking competition into account as a moderator.