Impact of fintech on bank risks: the role of bank digital transformation

Based on unbalanced panel data on 32 listed banks in China from 2010 to 2020, this study empirically examines the relationship between fintech, digital transformation of commercial banks, and bank risk. The empirical results indicate that fintech significantly increases bank risk. The mechanism analysis reveals that while fintech enhances the digitalization level of commercial banks, it also widens the digitalization gap among banks within a region. The former leads to a decrease in bank risk, while the latter contributes to an increase in bank risk. Additionally, the digitalization level of banks plays a negative moderating role in the relationship between fintech and bank risk, indicating that fintech poses a stronger risk impact on banks with lower digitalization levels. These findings underscore the importance of the digital transformation of commercial banks in the context of fintech, particularly the need for policy support to address risks arising from significant discrepancies in digitalization levels, especially for banks with insufficient digital transformation capabilities.