FinTech Collaborations and Bank Operational Efficiency:Empirical Evidence from Indian Commercial Banks

Abstract

This study empirically examines the impact of FinTech collaborations on the operational efficiency of Indian commercial banks over the period 2017–2023. Using a panel dataset of nine banks (comprising both public and private sector institutions), the study investigates three primary dimensions: (1) the overall effect of FinTech adoption on bank efficiency, (2) its influence on profitability as measured by Return on Assets (ROA), and (3) its impact on cost efficiency proxied by the Cost-to-Income Ratio (CIR). Employing Ordinary Least Squares (OLS) regression with interaction terms and controlling for bank size and non-performing assets (NPA), the findings reveal that FinTech adoption exerts a statistically significant positive effect at the 10% level on profitability (β = −0.062, p = 0.059), while its influence on CIR reduction, though directionally negative (β = −1.018), does not achieve conventional statistical significance. Private banks outperform public banks across all performance metrics, with a mean ROA differential of 0.181 percentage points. The sector interaction term is statistically insignificant (p = 0.311), indicating that the fintech–profitability relationship does not differ significantly across bank types. Bank size and NPA quality emerge as the dominant structural determinants of efficiency outcomes. The paper contributes to the emerging literature on digital transformation in Indian banking and offers policy insights for regulators and banking strategists.