The Fintech Revolution and its Impact on Bank Profitability: Empirical Evidence from Indian Commercial Banks

Abstract

In the era of rapid digital transformation, fintech has emerged as a key driver of innovation in the banking sector. This study examines the impact of fintech investment on the financial performance of Indian commercial banks during the period 2015–2023. Using panel data from 12 Nifty-listed banks, a fintech investment index is constructed through text mining techniques applied to annual reports. The study employs the System Generalized Method of Moments (SGMM) to analyze the dynamic relationship between fintech investment and bank profitability. The findings reveal that fintech investment has a positive and significant effect on Return on Assets (ROA), while its impact on Return on Equity (ROE) is not significant. The study contributes to the growing literature on fintech by highlighting its role in improving operational efficiency and profitability, while also providing policy implications for promoting digital innovation in banking.