The Impact of Fintech on Non-Performing Loans in Chinese Commercial Banks

The rapid penetration of financial technology (FinTech) in the banking system has increasingly affected on the credit risk of commercial banks. Based on the panel data of 32 Chinese commercial banks from 2014 to 2023, this paper systematically studies the relationship between the development of fintech and the non-performing loan ratio. The research focuses on two core questions: First, can FinTech effectively reduce banks’ non-performing loans or, under certain conditions, exacerbate credit risks? Second, does the applications of Fintech affect different types of banks differently? In terms of methodology, this paper adopts a fixed-effect panel regression model and robustness tests. Empirical results show that there is an inverted U-shaped relationship between the development of FinTech and the non-performing loan ratio. Furthermore, this nonlinear relationship is manifested significantly in state-owned banks and city commercial banks. The findings suggest that different types of banks should implement differentiated digital transformation strategies in combination with their own resources and governance structures.