REMOTE PROJECT ON IMPACT OF FINTECH IN BANKING SECTOR

FOR PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE CERTIFICATION OF

BANKING AND INSURANCE BY NSE ACADEMY

Industry Readiness Program on Banking & Insurance

GUIDED BY: SUBMITTED BY:

Mr. S R Ramesh SHRUTI SHARMA
NSE ACADEMY B&I- BATCH 2
IBMR, IPS ACADEMY
 TABLE OF CONTENT

INTRODUCTION…………………………………………………………………………2-4

INTRODUCTION OF SEGMENT/INDUSTRY………………………………………...5-9

OBJECTIVE OF STUDY…………………………………………………………………10

METHODOLOGY………………………………………………………………………...11

ANALYSIS AND DATA INTERPRETATION…………………………………………12-17

CONCLUSION…………………………………………………………………………….18-19

REFERENCES……………………………………………………………………………..20-21
 INTRODUCTION

Financial institutions are established to accomplish a paramount goal in each and every country,
in a continent like Asia where the financial technology is becoming inexorable to follow and its
impact is having effect from most developed countries of Asia to the least developed. Its
performance and success will lead the country’s economy to prosper and to contribute to the
world economy. Traditional financial institutions are in the era which, they have to change with
current technology, the new proposition of financial technology called Fintech. It is a finance
combination with technology or computer-based application to make and finance services
accessible and more flexible to the customer with or without the intervention of financial
institutions. There is no doubt that traditional financial technologies have undergone a huge
transformation throughout the last decade, and the new types of financial technologies, Fintech
represent a currently innovative and emerging field, which has attracted attention from the media
as well as investors. A study by ‘’Fintech Disruptor Report (2017), found that financial
institutions estimate that up to one-third of their current revenues could be at risk from Fintech
innovations’’. This impact will make traditional institution to collaborate with Fintech
institutions (for not being out of functioning) or they also can become Fintech solution provider
to stay active. The nature of financial services in banks, insurers and asset management
companies are being redefined by technologies like artificial intelligence and crypto currencies
(KMPG, 2015). The Financial Services sector is transforming with the innovative products and
solutions. Customer expectations have primarily driven those innovative ideas and also
continued pressures on cost and varying regulations have great impact on traditional services.
Addressing the organizational response to Fintech is proving challenging to many institutions.
Fintech is a weak signal to the financial institution, with its rapid development along with
disruptive impact in traditional financial institutions. To better understand how traditional
financial institutions, including banking services, insurance companies and asset managers, are
disrupted by emerging Financial Technologies (Fintech), Some of the Articles, Books, Journals
related to this, have been analyzed.
In recent years, new technologies, such as the internet finance, Blockchain, artificial intelligence,
and 5G, have continued to penetrate the finance, which forms the Fintech. In 2017, the Financial
Stability Board (FSB) proposed that Fintech can create new business models, applications,
processes, or products, which will have an impact on financial markets, financial institutions, or
the way in which financial services are provided (FSB Financial Stability Board). The Basel
Committee on Banking Supervision believes that international Fintech is mainly active in four
areas: payment and settlement, deposits and loans and capital raising, investment management,
and financial market infrastructure. It has created a variety of financial products and financial
services such as digital currency, equity crowdfunding, Robo-Advisors, and customer identity
authentication. The potential impact of Fintech on the financial industry is mainly reflected in
financial stability and access to services. Fintech may bring profound changes, but it will also
bring significant regulatory challenges (Philippon 2015). Faced with the rapid development of
financial technology and potential risks, all countries are actively exploring their own regulatory
methods. At present, there are three main regulatory models in the world. Countries represented
by the United States mainly implement restrictive supervision models, and the direction of
supervision is mainly stable; countries represented by China adopt an inclusive supervision
model and adopt a passive, development-oriented supervision model; The experimental models
represented by the United Kingdom, such as the regulatory sandbox and the newly established
framework model, are also called smart regulation or regulatory technology. Moreover, Fintech
has the dual characteristics of both technology and finance, which may have a greater impact on
the risk behaviors of commercial banks. The stability of banks is also affected by the progress of
information technology and the competitive pressure of Fintech companies, and banks need to
review their competitive advantage to adapt to the new reality On the one hand, from the
perspective of technology, the new technology can reduce the cost of searching information
(such as Internet search), improve the quality and speed of information acquisition (such as big
data analysis), and use cryptography to build trust mechanisms (such as Blockchain) to improve
the risk management level of banks. On the other hand, from a competitive point of view, the
technology giant (Big Techs), with its lax regulatory and technological advantages, enters bank
business, and eroded bank profits leading to increase banks risk-taking level. In order to cope
with the dual challenges of technology and competition, more and more banks have either
strengthened their strategic cooperation with technology giants or increased the investment
layout of Fintech. From 2018 to 2020, the People’s Bank of China established a number of
financial technology companies to lead the industry. As the central bank’s layout and planning in
Fintech have a role as a weathe vane, major domestic banking financial institutions have also
accelerated the strategic deployment of financial technology. It will lead to widen the gap in
Fintech strength. Moreover, technological innovation has created a “winner-take-all” banking
market structure to increase the vulnerability of small and medium banks (Guellec and Paunov
2017; Schumpeter 1912). At this time, Fintech presents the ‘creative destruction’ phenomenon
described by Schumpeter (1912).

The Board of the International Organization of Securities Commissions (IOSCO) (2017) with
their IOSCO committee on Emerging Risks (CER) provided report on the evolution of financial
technologies and they conducted survey of Distributed Ledger Technology (DLT) along with
World Federation of Exchanges (WFE). In the same vein, Financial Institutions need to quench
the thirst of innovation in order to withstand the changing digital environment. The study has
focused on the Innovative business models and emerging financial technologies which would
transform entire financial industries and pointed out the increased growth of computer processing
power. While other studies found the current scenario in digital finance along with their potential
future by using multistage process. The results reveal that evolution of financial technology has
impact over traditional performance and practice. Ironically it was proved long back that the
processing power of computer has more than doubled every 24 months. And its cost of
processing has seen a reduction of 10 billion times in the first 50 years of the computer era,
started emerging in 1950.
It have been noticed a dramatic elevation in memory power of memory cards in the past few
decades; a laptop having one terabyte of flash storage, which is a growth of 100,000 times in 30
years; and a single smart phone now has more computing power than NASA had in
1969(Moore, 1965). Another recent report also discussed about the risks and challenges of these
emerging technologies like cross border risk, malpractice and fraud by the platform and the
users. The Financial industry is growing rapidly with increasing risks and challenges. They have
provided the figure of global Fintech investments from 2005 to 2016 (IOSCO, 2017) .
 INTRODUCTION-BANKING AND INSURANCE INDUSTRY

BANKING SECTOR: The banking sector in India has the advantage of access to one of the
largest and most stable global financial networks. It has been strengthened by a series of
financial and regulatory reforms implemented recently, such as flexibility in lending rates,
gradual dilution of government holdings in public-sector banks, and the easing of restrictions on
private-sector and international banks. As the Indian economy is poised for a faster growth rate,
its financial sector dominated by both insurance and banking companies looks attractive for
long-term investment. Indian banks and insurance companies can take advantage of the growing
domestic market while aspiring for global competitiveness.
Although the international banking giants of the US and elsewhere were shaken by the financial
crisis—resulting in large bailouts by the US and other federal governments, the Indian banking
industry remained stable, thanks to the conservative approach adopted by Reserve Bank of India
(RBI). The potential growth of the banking sector stems from the fact that only 15 percent of the
population has ever borrowed from banks, and more than 40 percent do not even have bank
accounts. Continued urbanization and rising middle-class incomes are the other indicators of the
long-term potential of banks. While most banks lend primarily to industry and services (to the tune
of 68 percent), farm lending is 13 percent and personal lending 19 percent. Home mortgages
account for more than 50 percent of personal lending.
The banking sector witnessed a surge in credit demand from 2005 to 2010, as the corporates came
up with huge expansion plans, and the growth in the spending power of the middle class led to a
significant expansion in retail banking. However, the growth opportunities resulted in serious
issues of capital adequacy, and the prolonged recession led to the generation of a bulge in non-
productive assets, invariably making the sector look vulnerable. This led to continued volatility in
banking stocks. Major issues faced by public-sector banks are:
 Capital adequacy
 Competence in risk management
 Adoption of new technology
 Merger of smaller banks into viable entities
 Professionalism in management and supervision to replace the control of the finance ministry
 Freedom to acquire global talent

Indicators of banking strengths in India:
Between FY 2009-10 and FY 2012-13 (during the period of global recession):
 Bank deposits grew from 44,928 billion rupees (710 billion USD) to 67,504 billion rupees (1.1
trillion USD)
 Bank credit grew from 32,448 billion rupees (510 billion USD) to 52,605 billion rupees (830
billion USD)
 Per-capita credit surged from 28,431 rupees (450 USD) to 44,028 rupees (690 USD), indicating a
strong appetite for bank credit
 Credit-deposit ratio grew from 74 percent to 79 percent (largely controlled by RBI)
 By the end of FY 2012-13, the banking sector had 109,811 branches
 The Indian banking sector reported a net profit of 1,027.51 billion rupees (approximately 16 billion
USD), with almost an 11.5-percent net-profit margin on its gross turnover of 149 billion rupees
for the FY 2012-13.
Private banks have generally outperformed PSU (public sector undertaking) banks in terms of net-
interest margins and returns on total assets:
 Net-interest margins: PSU banks 3.8 percent, private banks 5.1 percent
 Rate of return on assets: PSU banks 1.0 percent, private banks 1.3 percent
 Capital adequacy: PSU banks 13.3 percent, private banks 17.5 percent
Newly formed private banks have the competitive advantage due to strong business models, larger
proportion of fee-based income in total income earned, better technology, leaner organization and
aggressive marketing strategies generating new revenue streams.
The Pradhan Mantri Jan-Dhan-Yojana (Prime Minister’s People Money Scheme) launched by
Prime Minister Narendra Modi last August helped to add 115 million accounts with 8,698 crore
rupees (1.4 billion USD) in bank deposits.
Foreign direct investment (FDI) and portfolio investment limits in private banks have been hiked
to 74 percent, but in the cases of PSU banks they remain at 20 percent. FDI in banking and
insurance can improve financial stability and capitalization, Use of better technology and Risk-
management capability
 INSURANCE SECTOR: The Parliament of India recently ratified the Insurance Laws
(Amendment) Bill, promulgated earlier as an insurance ordinance through presidential
proclamation, hiking the upper limit of foreign investment in insurance from 26 to 49 percent. The
law requires that management control and ownership of insurance companies remain with Indian
collaborator entities. The aim is to reduce the restrictions on entry to the insurance market and
enable flows of much-needed capital into the sector. MetLife and AIG are some of the foreign
players who already have operations in India through joint ventures.

Significant joint ventures in the insurance sector include:

 Bajaj with Allianz SE of Germany
 Aditya Birla Group with Sun Life Financial of Canada
 SBI Life is a joint venture of SBI with BNP Paribas Assurance of France
 Future Generali India Insurance is a joint venture between Future Group and Italy’s Generali
Group
 Bharti AXA General Insurance Co. is a joint venture between Bharti Enterprises and France’s
AXA Group.

India, along with other countries in the Asia-Pacific region, is considered important by the global
players in the insurance space. The large insurable population exceeding 550 million is an
important consideration in determining the attractiveness of this sector. India’s insurance market
could grow 400 percent in the next 10 years from its current size of 60,000 crore rupees. India’s
life insurance sector is one of the largest in the world, with an approximate 40-percent growth rate
based on new business premium collections. The number of policies is expected to grow at a 12-
 to-15-percent CAGR (compound annual growth rate) in the next decade. With the penetration level
expected to reach 5 percent from the present level of 3.9 percent in the next five years, the total
market size could reach the one-trillion-USD mark within seven to nine years.

The life insurance business

India, with the second largest population in the world, has very low life insurance coverage, in
terms of life insurance premium collections, accounting for only 2 percent of global premium
collections against a population that is more than 16 percent of the world’s population. Penetration
of life insurance (based on a premium-to-GDP ratio) has remained at 3.5 to 3.9 percent of GDP in
India, compared to 11 percent in Japan and 9 percent in the developed world. A projected growth
rate of 7 to 8 percent in GDP means a huge rise in demand for insurance products, considering the
rise in life expectancy and income levels of the upper-middle and middle class populations with
fast-changing lifestyles. In terms of the number of life insurance policies, India is at the top with
almost 360 million policies, the number growing at a rate of more than 12 percent annually.
The recent relaxation of foreign ownership and investment limits has evoked a positive response
from global insurers, and some of them have shown interest in increasing their stakes in the
existing joint ventures. Many more such joint ventures are likely to follow.

International joint ventures could face some challenges at initial stages in the Indian market. The
life insurance market has been completely dominated by LIC (Life Insurance Corporation), wholly
owned by the central government. The market share of LIC fell gradually from 100 percent to 75
percent since the insurance sector was opened up to private investors 15 years ago.
In an environment of strong competition, a bancassurance model could help both banks and
insurance companies, as this would strengthen existing distribution channels, particularly in rural
markets. The anticipated evolution of post offices as banks in a couple of years would further
accelerate the penetration of banking and insurance in rural markets.

Non-life segment
Out of 28 major non-life insurers, some companies from the private sector also operate as
underwriters of policies for accident coverage, travel and health insurance. Some well-known
names in this category are:
 Cigna TTK Health Insurance Co
 Max Bupa Health Insurance Co
 Star Health and Allied Insurance Co
 Religare Health Insurance Co
 Apollo Munich Health Insurance Co
The major public-sector, non-life insurers include:
 Agricultural Insurance Co
 Export Credit Guarantee Corp
 General Insurance Corp (insurance business)
 New India Assurance Co
 National Insurance Co
 United India Insurance Co
 Oriental Insurance Co
The general insurance or non-life insurance market size is around 770,000 million rupees (12.41
billion USD) in premiums per annum. The growth rate of this segment has been 17 percent per
annum. Health insurance accounts for a quarter of the non-life insurance market. The markets in
the non-life segment could show an accelerated growth rate of 20 to 25 percent per annum.
Insurance regulator IRDA has estimated that this sector will require additional capital to the tune
of 500,000 million rupees within the next 10 years.
Some of the state-run, non-life insurers such as National Insurance Company as well as New India
Assurance Co are considering an IPO (initial public offering) ahead of listings on the stock
exchange, with the central government considering a divestment of its stake in the insurance arm.
The giant Life Insurance Corporation being listed could be a huge opportunity for investors. Such
a move, however, is bitterly opposed by unions. Complete privatization of insurance and banking
is not going to happen anytime soon. As far as PSU banks are concerned, the government has
decided to keep a 52-percent stake.

The RBI has permitted banks to earn brokerage fees by selling insurance products. The central
government plans to launch some additional insurance schemes to protect farmers against various
risks related to agriculture. Growing upper-middle and middle classes with fast-rising young,
educated, insurable populations will help make market growth sustainable.
 OBJECTIVE OF STUDY

1.To Serve the Unmet Financial needs of those segment of population which are not the core
target segment of traditional financial services models.

2. Reduce Information Asymmetry: Investor and Protection.

3. FinTech aims to contribute to larger goal of financial inclusion.

 METHODOLOGY

The paramount purpose of this study is to demonstrate the descriptive and exploratory study
between traditional financial institutions and Fintech institutions. And to identify how disruption
from Fintech has dramatically come to change the way that traditional financial institutions were
in practice. The research design adopted for this study is the exploratory and descriptive
research design under which, observation on survey of existing research is explored and the
described the relation between Traditional and fintech institutions. The target population for this
study is the evolution of Fintech industry into the global financial sector around the world,
though the sample of the present study is emerging economies like the Asian countries. The
sample selection is based on economically related seven countries will be selected in Asia. For
this study, the sample size for data collection is based on seven Asian countries viz., Nepal,
Malaysia, India, Indonesia, Thailand, Philippines and Vietnam based on the likelihood or
relevance on the GDP growth; countries overall income level and Fintech practices evolution in
those countries. The sample frame adopted for this study is at the level of which the disruption of
Fintech technology is happened; where the adoption of Fintech is happening, and at which level,
the lower or middle-income countries can be described by the evolution of Fintech. The data
sources for this study is guided by secondary sources, where relevant and reliable sources of data
are collected from World Bank data (2015-2017)and other relevant websites such as Global
Fintech report (from 2013 to 2017), World Fintech Reports (2017) and PWC Global Fintech
survey (2017).World bank data were used to access data from traditional financial institutions
data with Fintech and non-Fintech practices (2015-2017) and selected countries’ GDP
percentage growth (from 2013 to 2017).Global Fintech report were used to access Fintech
investment on private equity, venture capital merger and acquisition in Asia (from 2013 to 2017).
The World Fintech Reports is used to access the data on pros and cons of Fintech while
partnering with traditional financial institution (from March 2017). And the PWC Global Fintech
survey is used to access data on the incumbents ’activities believed are already conducting with
Fintech companies (from 2016 to 2017). The dependent variables in this research study were
based on Saving and financial institution account, whereas the independent variables were based
on eight predictors viz., paid utility, mobile money account, made or received digital payment;
debit card& credit card payment, paid utility bills and use of mobile phone or internet to access
financial institution .Data analysis process is a study on quantitative data. The information for
this research are collected and then coded into computerized analysis method (in excel and
then Tableau for representation), through which information are entered in statistical software
like IBM SPSS for linear regression analysis on traditional financial institution data with
Fintech data. Then Gretel is used to analyze the ordinary least square (OLS) regression
model on countries GDP growth with Fintech investment.
 DATA ANALYSIS AND INTERPRETATION
In this section interpretation of data analysis has been done with the results obtained in
regression analysis.
1.Regression Analysis

Table 1: Regression Result on Saving with 5 Predictors

MODEL SUMMARY

model R R Adjusted Std. Change statistics

square error of
R square R F df df Sig.
the
square
estimate change 1 2 F
change
change

1. 1.00 1.000 1.000 .00040 1.000 91081.316 5 1 .003

0a

a. Predictors: (Constant), PU, MPINt, RecdPYM, MMA, DGIpYm

b. Dependent Variable: SV

The econometric result of the first model of regression analysis, where saving is taken as dependent
variable and paid utility bills, received digital payment, mobile money account, use mobile or
internet to access account, made or received digital payment, as independents Variable. This
analysis shows that we reject null hypothesize since the significance is 0.003 which less than the
0.05 and we accept alternative hypotheses. As in general we often reject the null hypothesis if this
chance is smaller than 5% (p < .05) and this is universally accepted for any hypothesis testing.
Means that, the independent variables have positive statistical significance and correct on the
independent variables on saving. The R and R2 shows that we describe the independent variables
by the dependent at 1, which means at 100% of resembling level.
 Table 2: Regression Result on Coefficients

model Unstandardized Standardized T sig

Coefficients Coefficients

B Std. Beta
Error
1. (Constant) .047 .001 65.780 .010
MPINt .374 .006 .350 62.399 .010
DGIpYm .342 .005 .641 62.283 .010
RecdPYM .705 .007 .945 104.331 .006
MMA -2.864 .015 -.982 -188.682 .003
PU -0.47 .001 -.072 -40.501 .016

a. Dependent Variable: SV

In the coefficient result of the analysis, the R and R2 have complete level of values (1.0000),
which indicate that 100% of variables in saving of traditional financial institutions can be
explained by Fintech variables such as paid utility, received digital payment, mobile money
account, and made or received digital payment. In another way, good resemblance can be highly
due to the strong relationship between dependent and independent variables. The standardized
coefficients, Beta of independent variables shows that, received digital payment has the greatest
impact on the dependent variables since it is 0.945. Mobile or internet usage (0.350) and made
digital payment (0.641) have the minimum level on the outcome on saving. And mobile money
account (-0.982) and utility paid (-0.072) has negative effect on the outcome the dependent
variable. The significance level of the independent variables is impacting savings by usage of
mobile or internet (0.10) and made digital payment (0.10) have the same significance level;
received digital payment (0.006) and mobile payment (0.003) and utility paid (0.16). Therefore,
the result from the table 1 of regression analysis is following alternative hypothesis implying that
the linear effect from paid utility, received digital payment, mobile money account, usage of
mobile or internet to access account, and made digital payment on saving at financial institution
cannot be rejected.
 Table 3: Financial Institution with 3 Predictors
MODEL SUMMARY

model R R Adjusted Std. Change statistics

square error of
R square R F df df Sig.
the
square
estimate change 1 2 F
change
change

1. .92 .855 .710 12.93500 .855 5.889 3 3 .090

5a

a. Predictors: (Constant), MIFIA, PUB, DC

b. Dependent Variable: FIA

The econometric result of the second model of regression analysis, where financial institution
account is taken as dependent Variable and debit card payment, paid utility bills and usage of
mobile phone or the internet to access a financial institution account as independents Variable.
This analysis shows that to reject null hypotheses since the significance of 0.090 is more than the
0.10 and to accept the alternative hypotheses. Therefore, the result from the regression model is
alternative hypotheses. Table 4: Regression Result on Coefficients

model Unstandardized Standardized T sig

Coefficients Coefficients

B Std. Beta
Error
1. (Constant) 54.928 19.976 2.750 0.71
DC 2.090 .732 1.974 2.853 0.65
PUB -.745 .358 -.524 -2.081 .129
MIFIA -2.781 1.580 -1.209 -1.760 .177
a. Dependent Variable: MIFIA
We can see in the second regression model that the R (0.925) and R2 (0.855), has more than 85%
level on the dependent variable, which indicate 100% of variables in traditional financial
institutions account can be explained by 100% correlation with Fintech variables. The
standardized coefficients, Beta of independent variables shows that; debit card has the greater
impact on the outcome on financial institution account. And paid utility bills and usage of mobile
or internet to access a financial institution account had negative coefficients. Therefore, the result
from the table 3 of regression analysis is alternative hypothesis having linear effect from debit
card, paid utility bills and usage of mobile or internet to access account on no. of financial
institution account cannot be rejected.

Model Overall Summary

S.NO. Dependent variables R Square Predictors

1 Saved at financial 1.000 Paid Utility bills,

institution account Received Digital
Payment, Mobile
money Account,
Mobile or Internet to
access account,
Made or Received
Digital Payment
2. Having Financial 0.855 Debit card, paid
institution account utility bills and the of
used a mobile phone
or the internet to
access account
 GROWTH OF FINTECH SERVICES SINCE 2010

HYPOTHESIS 1. The development of Fintech affects the risk behavior of banking groups,
and has a greater impact on small and medium banks.
Large banks have sufficient financial resources, strong technical strength and large customer
groups, and they are more inclined to build their own teams, conduct independent research and
development. Moreover, they are more likely to cooperate with the companies in the field of
digital technology (like GAFA and BATX). Therefore, large banks are more actively developing
Fintech from debt business, intermediary business, and asset business and realizing digital
transformation. Large Banks are also likely to be subject to stricter supervision and their risk
behaviors are more cautious (Beltratti and Stulz 2009). In addition, in China, the customer
groups of large banks are mostly relatively high-quality large enterprises or state-owned
enterprises, and they are more likely to receive implicit government guarantees, while small and
medium-sized banks are mostly targeted at SMEs. As a result, Fintech has a bigger impact on
smaller Banks than big ones.

HYPOTHESIS 2. Fintech affects the bank’s risk-taking by affecting the internal interest
income and management costs of the bank.
The rapid development of Fintech has two aspects on banks’ risk-taking behavior. On the one
hand, Fintech gradually penetrates into the business areas of traditional banks. The increase of
Banks’ capital cost, the weakening of their loan pricing ability and the acceleration of the
frequency of interest rate fluctuations lead to the narrowing of the most traditional and major
income source of banks’ deposit and loan spreads. All of these affect the banks’ operational
stability. Compared with large banks and online banks, small and medium-sized banks have
higher capital costs and a faster decline in net interest margin, which in turn increases the bank’s
risk-taking. On the other hand, the spread of new technologies to banks will help improve
efficiency and optimize governance, thereby reducing management costs. For example, big data
technology can effectively process the bulk transaction data of traditional banks. Enable the bank
to achieve precise marketing, low cost and centralized management. Moreover, it also can more
effectively optimize the credit process, identify credit risks, standardize the behavior of senior
executives, and reduce the risk-taking level of banks. The development of financial technology
has promoted the transformation and upgrading of traditional banks to digitization, which has an
impact on bank management capability and the operation stability of commercial banks.
Considering the effects of both aspects, the impact of new technologies on bank risk-taking is
uncertain and depends on the relative strength of the two effects (Gu and Yang 2018).

HYPOTHESIS 3. Fintech influences Banks’ risk-taking by influencing market competition

and residents’ willingness to save.
On the one hand, Fintech promotes the marketization of interest rates in China and intensifies
competition in the banking market. Moreover, the market space of banks will be greatly
suppressed. China’s banking industry has experienced severe financial repression Risks 2021, 9,
99 9 of 27 for a long time (Wang and Johansson 2013). It may not only reduce the bank franchise
values through competition, thereby incentivizing them to take more risks (Allen and Gale
2000), but also may break the monopoly of large banks and new technologies through
competition, and improve bank efficiency through technology spillover effects (Shen and Pin
2015). Meanwhile, Fintech has promoted the phenomenon of ‘financial disintermediation’,
which means that with the development of direct financing, the supply of funds bypasses the
intermediary system of commercial banks through some new institutions or new means, and is
directly transported to the demand unit. Take Yu’eBao, launched by Alibaba, as an example. Its
interest rate is significantly higher than the interest rate of commercial bank demand deposits,
and even higher than the interest rate of commercial bank fixed deposits. At the same time,
Yu’eBao also supports T + 0 deposit and withdrawal. The appearance of such internet financial
products is obviously more attractive to customers than the traditional deposit products of
commercial banks, and therefore may have an impact on residents’ willingness to save. To meet
the challenge, banks will also attract savings back by raising deposit rates, but this will increase
the cost of bank funds. As mentioned above, the impact of new technologies on banks’ risk-
taking behavior depends on the relative strength of the two forces.
 CONCLUSION
In the context of the continuous innovation of block-chain, artificial intelligence, 5G, and other
emerging technologies that have brought greater impact to the business scope, business model
and risk behavior of traditional banks, research on the relationship between Fintech and small
and medium-sized banks risk-taking is of great significance. The main conclusions of this study
are as follows: (1) there is a significant negative correlation between Fintech development level
and bank risk-taking, that is, the development of Fintech will reduce the bank’s risk-taking and
improve the overall stability of the bank’s operations. After considering the existing endogenous
problems and the robustness test, this relationship still holds. (2) The impact of Fintech on bank
risk-taking is heterogeneous. This article analyzes the Fintech development level of the eastern,
western and central regions of China and banks of different sizes. It can be found that the Fintech
level of the eastern and western regions can reduce the risk of banks more than the central
regions. The development of Fintech has a greater impact on small and medium-sized banks.
From the perspective of institutional differences, Fintech has a restraining effect on the overall
risk of banks, and the restraining effect of city commercial banks is stronger than that of rural
commercial banks. (3) The Risks transmission path of Fintech’s influence on banks’ risk-taking
mainly includes internal channels and external channels of banks. The results show that the net
interest margin and management costs within banks are part of the intermediary factors of
Fintech affecting bank risk. In effect, the external market competition channels of banks will
suppress bank risks, while the households’ willingness to save channels will amplify bank risks.

The major aim of this study is to demonstrate how disruption from Fintech has dramatically
came to change the way that traditional financial institutions were in practices. And how these
practices influenced the overall growth of selected Asian countries in term of GDP and
investment in Fintech of private equity, venture capital and merger and acquisition in Asia as a
whole. Based on the historical data, it is discovered that Saving at traditional financial institution
is significantly impacted by paid utility, received digital payment, mobile money account, usage
of mobile or internet to access account, Made Digital Payment and also financial institution
account is impacted by the usage of debit card, the received digital payment, usage of mobile or
internet to access account and paid utility bills. Thus, in overall the study has demonstrated the
disruption from Fintech on traditional financial institutions implies no performance in today
technological era. This study found that the progress of financial institution is leaning in the area
of Fintech and the future of Fintech can make the traditional financial intuitions no performing
institutions or inadequate to meet current need of clients. The impact of the investment on private
equity, venture capital and merger and acquisition in Fintech industry on Asian country’s GDP
growth and the key reasons and challenges Fintech companies are facing while looking for
partnership with traditional financial institution practices are discussed. To conclude, this study
attempted in bringing Fintech practices or applications and their performance in today scenario.
The outcome of this study is to create awareness on how Fintech is changing the traditional
financial institutions and its disruptive impact on the future of Asian financial intuitions. Since
nowadays Fintech has become an inexorable way to follow in all financial institutions and its
impact is having a paramount goal for the success of all financial institutions. Thus, the research
has described the disruptions of Fintech on traditional financial institutions. The major limitation
of this study is based on the selection of seven Asian countries out of the 48 forty eight counties.
It is due to difficulty in finding data, cost and short timeframe .For future research, it is suggested
to do an analysis on how future disruption will be; why Fintech investment is having a
downward sloping in the past 3 years and what are the different Fintech technologies that are
developing in the near future in traditional financial institution
 REFERENCES
1. Campbell, et.al, (2017). Technology Association of Georgia, Georgia Institute of Technology
and Raymond James, 2016 Research update.
2. Chishti, S., & Barberis, J. (2016). The Fintech book: the financial technology handbook for
investors, entrepreneurs and visionaries. John Wiley & Sons. (1st ed.pp.51-226-238-232)
3. Cornett, M, M., Adair, T, A., Nofsinger, J. (2015). Finance: Application & Theory. New York:
McGraw-Hill Education (3rd ed., pp.197-198)
4. Courbe (2016). Financial Services Technology 2020 and Beyond: Embracing disruption.
PwC’s 19th Annual Global CEO Survey, Jan 2016.
5. Dapp, T., & Slomka , L. (2015). Fintech reloaded–Traditional banks as digital ecosystems.
Publication of the German original.
6. Faid, N. (2016). Luxembourg, a Future FinTech Hub ?. The FinTech Book: The Financial
Technology Handbook for Investors, Entrepreneurs and Visionaries, 51-52.
7. Fintech Disruptor Report (2017). Innovation, distributed: mapping the Fintech Bridge in open
source era. Magnacartacomms. (pp. 16).
8. Gomber, P., Koch, J. A., & Siering, M. (2017). Digital Finance and Fintech: current research
and future research directions. Journal of Business Economics, 87(5), 537-580.
9. He, M. D., Leckow, M. R. B., Haksar, M. V., Griffoli, M. T. M., Jenkinson, N., Kashima, M.
M., ... & Tourpe, H. (2017). Fintech and Financial Services: Initial Considerations. International
Monetary Fund.
10. IOSCO Research Report on Financial Technologies (Fintech).2017. Retrieved from
https://www.iosco.org>IOSCOPD554
11. Kashyap (2016). The Fintech book: the financial technology handbook for investors,
entrepreneurs and visionaries. John Wiley & Sons. (1st ed.p.-22)
12. Koffi, H.W.S. (2016) The Fintech Revolution: An Opportunity for the West African
Financial Sector. Open Journal of Applied Sciences, 6, 771-782.
13. KPMG. (2015a). “Fintech 100 - Leading Global FinTech Innovators Report 2015,”.
14. Margaris, S. (2016). The FinTech Supermarket–The Bank is Dead, Long Live the Bank!. The
FinTech Book: The Financial Technology Handbook for Investors, Entrepreneurs and
Visionaries, 238-240.
15. Nicoletti, B. (2017). The Future of Fintech: Integrating Finance and Technology in Financial
Services. Springer.
16. Oshodin, O., Molla, A., Karanasios, S., & Ong, C. E. (2017). Is FinTech a Disruption or a
New Eco-system? An Exploratory Investigation of Banker Response to FinTech in Australia. In
Proceeding of Australasian Conference on Information Systems (pp. 1-11).
17. Reserve Bank of India (2017). Report of the Working Group on Fintech and Digital Banking
(p.2- 5-7). Retrieved From https://rbidocs.rbi.org.in/rdocs Publication Report/ Pdfs/WGFR68A
A1890D7334D8F8F72CC2399A27F4A.
18. Sleeves (2016). The Fintech book: the financial technology handbook for investors,
entrepreneurs and visionaries. John Wiley & Sons. (1st ed.pp.51-179)
19. Swamy, A. (2015). Evolution of Financial Services with Fintech.
20. TAG Fintech report (2017). Data analytics/Big data in financial services. Retrieved from
https://www.tagonline.org/files/documents/TAG-FinTech-2017- Data-Analytics-Big-Data-
Research-Report.pdf
21. World Economic Forum Report (2015). The future of financial services. Retrieved
fromhttp://www3.weforum.org/docs/WEF_The_future__of_finan cial_services.pdf
22. World Fintech Report (2017). Capgemini. (pp. 23-22-24,).
23. FSB (Financial Stability Board). 2017. Fintech. Research Report. Available online:
https://www.fsb.org/work-of-the-fsb/financialinnovation-and-structural-change/fintech/
(accessed on 3 May 2021).
24. https://internationalbanker.com/banking/indias-banking-and-insurance-sectors/
25. Pi, Tianlei, and Tie Zhao. 2014. Internet Finance: Category, revolution and Prospect. Finance
& Economics 6: