Bank FinTech development and bank performance in Australia

<p dir="ltr">This study investigates the impact of bank FinTech development on bank performance in Australia through a combination of systematic literature review and empirical analysis. The systematic literature review identifies significant research themes and gaps, providing a solid foundation for the development of the research question and hypothesis that guide the empirical investigation. The central research question is: What is the relationship between bank FinTech development and bank performance in Australia?</p><p dir="ltr">One challenge in investigating this topic is how to measure bank FinTech development. By employing text mining techniques, the study constructs a novel approach to quantify FinTech development using data from banks’ annual reports. This methodology helps to capture the extent of FinTech integration within the banking sector and provides an objective and data-driven measure for analysis.</p><p dir="ltr">To address the research question, the empirical study employs fixed-effect panel data regression, analysing data from 14 Australian domestic banks over the period 2008 to 2023. Additionally, a natural experiment is conducted, using the introduction of Consumer Data Rights in Australia in 2019 as an exogenous policy shock. This allows for a comparison between Australian banks (the treatment group) and New Zealand banks (the control group), providing further insights on the impact of bank FinTech development on performance.</p><p dir="ltr">The findings indicate a significant negative relationship between bank FinTech development and bank performance in Australia. Several robustness tests confirm the consistency of these results, underscoring the adverse impact of bank FinTech development on bank performance. These insights provide valuable guidance for policymakers, regulators, and industry professionals in formulating strategies that balance FinTech development with financial stability.</p>