Financial Technology and Profit Efficiency of Commercial Banks in Ethiopia

Ethiopian commercial banks are implementing financial technology (fintech) to help them operate more efficiently and effectively. As a new aspect of financial innovation, fintech has introduced a paradigm shift in financial service delivery in financial institutions, particularly Ethiopian commercial banks. This study aimed to understand how the profit efficiency of commercial banks in Ethiopia responds to financial technology adoption. Unbalanced panel data sets were gathered from 17 sampled banks’ financial reports covering 12 reporting years from 2011 to 2022. A stochastic frontier approach was employed. According to the research, Ethiopian commercial banks have a mean efficiency rate of 81.33%, indicating that they are profit-efficient. Moreover, there was a negative relationship between the banks' profit efficiency and the use of fintech. In other words, banking services offered by fintech platforms reduce the profit efficiency of banks working in Ethiopia. The banks are expected to develop a resource management and utilization capability that makes fintech more efficient and transforms the current stage of financial innovation into a correlation effect.