Does Fintech-Driven Competition Reduce Bank Risk-Taking? Evidence from Emerging Markets
DOI:
https://doi.org/10.65150/EP-jefrr/V2E10/2026-03Keywords:
Competition-stability hypothesis, Financial inclusion, Fintech adoption, Principal component analysis, Z-scoreAbstract
This paper examines the relationship between bank fintech competition and bank risk-taking using data from 18 emerging-market countries from 2014 to 2023. Previous studies have looked at fintech adoption and bank competition, or at bank competitiveness and performance, but few have examined how bank fintech competition affects banks’ risk-taking, especially in emerging countries, even though fintech matters a great deal to banking in these markets. The study applies a two-stage empirical model to panel data and build a fintech index, with financial inclusion as the proxy, using principal component analysis. The results show that fintech adoption, measured by financial inclusion, increases competition among banks, and that this competition is associated with less risk-taking. These findings are consistent with the competition-stability theory and point to a stabilizing role for fintech in banking, particularly in emerging markets where access to financial services is still limited. The study adds to the literature by identifying common trends, disparities, and factors that may influence banks’ risk-taking under bank fintech competition.
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