ROLE OF HYBRID MODELS OF DEFI AND TRADITIONAL BANKING SYSTEMS IN IMPROVING THE PROFITABILITY OF EUROPEAN BANKS: AN ANALYSIS OF THE FUTURE POSSIBILITIES

ABSTRACT Aim: The aim of this study is to investigate the impact of dedicated financial solutions (DeFi) solutions, digitalization, fintech adoption, regulatory environment, efficiency and risk and safety management on the profitability of European banks. Method: Using a deductive research approach, the study used a structured questionnaire to collect basic quantitative data from 201 employees in the European banking industry. Using descriptive and theoretical statistical methods including multiple regression analysis and correlation analysis are included and analyzed data to test the proposed hypotheses on the relationship between dependence change and profitability. Findings: The results revealed moderate adoption of DeFi solutions and digitization in the banking sector. A significant relationship was found between digital and fintech adoption and other variables, including operational efficiency and profitability. Notably, the regulatory sector demonstrated a strong positive relationship between profitability and the adoption of fintech solutions. The findings highlight the importance of combining technological innovation with regulatory compliance to improve banks’ financial performance. Keywords: Decentralised finance (DeFi), digitalization, fintech adoption, regulatory environment, operational efficiency