The Relationship Between Financial Technology (Fintech), Financial Stability and the Moderating Role of Financial Performance in Banking Industry
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Universiti Malaysia Sarawak (UNIMAS)
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This study explores at the moderating effect of financial performance, as well as the relationship between Malaysian commercial banks' use of financial technology (FinTech) and financial stability. A panel data regression technique was utilised to investigate the association of FinTech, financial performance (ROA), and their interaction on capital adequacy (CAR) using secondary data from 15 banks collected between 2020 and 2023. The findings indicate that financial stability is not directly impacted by FinTech adoption in a statistically significant way, and that this relationship is not tempered by financial performance.A panel least squares regression model was used to investigate both the direct and interaction effects of FinTech and ROA on CAR. To account for structural differences between banks, control factors such as bank age and total assets were included. The regression results show that FinTech adoption does not have a statistically significant influence on financial stability. Furthermore, the relationship between FinTech and stability is not significantly modified by financial performance as measured by ROA. These findings suggest that, despite FinTech's increasing incorporation into banking operations, its quantifiable influence on capital adequacy remains relatively minor in Malaysia.The regression results suggest that internal profitability may not be sufficient to improve bank stability on its own, despite the fact that certain banks fared well in terms of ROA during that period. The study contributes to the corpus of knowledge by giving empirical insights from a growing economy context and highlighting FinTech's evolving position in banking risk management.