Banks with Higher Levels of Fintech Adoption Exhibit Better Financial Performance Than Those with Lower Levels of Adoption

This study examines the impact of FinTech adoption on the financial performance of ‎commercial banks in India, with a particular focus on Return on Assets (ROA) as a primary ‎indicator of profitability. Drawing on a comprehensive panel dataset of Indian commercial ‎banks from 2012 to 2022, the research employs advanced econometric techniques—including ‎fixed effects, random effects, and dynamic panel models (Difference and System Generalized ‎Method of Moments)—to address endogeneity and capture both short-term and long-term ‎effects. The findings reveal that while higher levels of FinTech adoption are associated with an ‎initial, statistically significant decline in ROA—reflecting the transitional costs and operational ‎challenges of digital integration—banks with greater scale are better positioned to absorb these ‎short-term impacts and achieve superior financial outcomes over time. Traditional drivers such ‎as loan and deposit growth do not significantly influence ROA in the digital era, highlighting ‎the evolving determinants of banking success. The study validates Schumpeter’s Innovation ‎Theory and the Technology Acceptance Model, underscoring the need for strategic planning ‎and gradual implementation of FinTech solutions. Practical implications include ‎recommendations for regulatory support, digital literacy enhancement, and tailored financial ‎incentives to facilitate smoother digital transformation, particularly for smaller banks. This ‎research contributes novel empirical evidence to the limited literature on FinTech and bank ‎profitability in emerging markets and offers actionable insights for banking professionals, ‎policymakers, and financial regulators navigating the digital age‎.