Financial technology and bank stability in an emerging market economy

Rizky Yudaruddin; Wahyoe Soedarmono; Bramantyo Adi Nugroho; Zhikry Fitrian; Mardiany Mardiany; Adi Hendro Purnomo; Eka Nor Santi

doi:10.1016/j.heliyon.2023.e16183

Financial technology and bank stability in an emerging market economy

Heliyon. 2023 May 19;9(5):e16183. doi: 10.1016/j.heliyon.2023.e16183. eCollection 2023 May.

Authors

Rizky Yudaruddin¹, Wahyoe Soedarmono², Bramantyo Adi Nugroho³, Zhikry Fitrian³, Mardiany Mardiany³, Adi Hendro Purnomo³, Eka Nor Santi³

Affiliations

¹ Mulawarman University, Samarinda, Indonesia.
² Sampoerna University, Jakarta, Indonesia.
³ East Kalimantan Research and Development Agency, Provincial Government of East Kalimantan, Indonesia.

Abstract

Using a sample of 141 banks in Indonesia during the 2004-2018 period, we investigate the impact of financial technology (FinTech) firms on bank stability. We find that more FinTech firms tend to enhance bank stability regardless of types of FinTech firms and the measurement of bank stability. Meanwhile, we also find that small banks and non-listed banks tend to benefit more from the presence of FinTech firms. Specifically, small banks and non-listed banks exhibit lower riskiness and higher capital ratios following an increase in the number of FinTech firms. This paper, therefore, emphasizes that FinTech development might be beneficial for financial stability, particularly when FinTech companies with small banks or non-listed banks.

Keywords: Bank stability; Financial technology; Online payment; Online peer-to-peer lending.