The Beginning of Digital Technology: The Impact of Financial Technology on the Performance of Banking Sector in Pakistan

Abstract

The objective of this study is to investigate the influence of financial technology on the financial performance of a bank. This study uses the three factors of financial technology which are total number of mobile account users, total mobile transactions and value of money rather than focusing on one component. This study collect data from 15 commercial banks of Pakistan using the purpose sampling technique. The financial performance of banks is measures through four ratios which are return on equity (ROE), return on asset (ROA), yield on earning (YOE) and profit margin (PM). Some firm-specific control variables include firm size, age, market capitalization and capital ratio and macroeconomic controls variables are included deposit growth, inflation and GDP growth. The result shows that financial technology transactions have a significant positive impact on banks’ performance. The impact of total number of mobile account users and value of money does not trigger the banks performance. Financial technology transactions improve bank performance as the impact is positive and significant. Increasing number of mobile transactions boost the performance of commercial banks of Pakistan. As the financial technology improving banking performance state bank of Pakistan should set regulations about financial technology adoption of all banks and there should be level of investment provided by the state bank of Pakistan. This study provides insight to the new researchers about financial technology and its importance in the banking sector. This study enriches literature on financial technology in the context of commercial banks.