Discover how fintech is transforming bank performance: insights from an emerging economy

Fintech startups are using new technologies to force traditional banks to change their business models, which could potentially threaten their position in the financial industry. Banks collaborate with fintech startups to enhance their technological infrastructure and gain a competitive advantage. This paper investigates the impact of collaborations between banks and fintech companies on commercial banks’ performance using a panel dataset from 2013 to 2021 in Türkiye. The One-Step System GMM model results vary by the size of banks and bank performance indicators. First, findings indicate that the collaborations between commercial banks and fintech companies have a positive impact only on banks’ ROE for large-scale traditional banks, which indicates a potential complementary effect. Another significant outcome implies that fintech development has a negative influence on banks’ ROA and ROE for large-scale banks, which reveals that specific fintech services and goods can be substituted for traditional banks. This study analyzes how collaborations between commercial banks and fintech firms influence bank performance, using data from Türkiye between 2013 and 2021. The findings reveal a nuanced picture. For large-scale traditional banks, partnering with fintech firms tends to improve return on equity (ROE), suggesting that these collaborations can complement existing business models. However, the broader development of fintech across the industry appears to have a negative impact on both return on assets (ROA) and ROE for large banks. This suggests that some fintech products and services may be substituting traditional banking functions, thereby reducing profitability. The work is significant because it offers empirical evidence on the mixed impacts of fintech integration. It helps clarify that while collaborations with fintech firms can drive improvements in certain performance metrics, they can also disrupt traditional revenue streams. This insight is valuable for banks as they look to strike a balance between embracing technological innovation and safeguarding their core operations.