The FinTech Imperative for Banks: Aligning Competitiveness and Performance رسالة دكتوراة

Abstract

This study investigates the impact of Financial Technology (FinTech) adoption on the banks' competitiveness and financial performance. Utilizing data from all banks operating in Palestine, including listed and unlisted banks registered with the Palestine Monetary Authority (PMA) between 2015 and 2022, the study applies Response Surface Methodology (RSM) to explore the relationship between FinTech adoption and various competitiveness and financial performance indicators related to banks. RSM is particularly suited for modeling and analyzing non-linear relationships, as it employs polynomial regression models to approximate the response surface. This methodology offers a more flexible and precise representation of the underlying interactions between variables, providing significant advantages over traditional linear models in capturing complex patterns. The independent variable Technological Asset Ratio (TAR), used as a proxy for FinTech adoption, is evaluated against several dependent variables, including the Cost to-Income Ratio (CIR) and Loan Market Share (LMS) as measures of banks' competitiveness, and Return on Equity (ROE) and Net Interest Margin (NIM) as indicators of banks financial performance. The results indicate that TAR significantly enhances CIR, LMS, and ROE, with p-values below the 0.05 threshold, suggesting a strong positive relationship. However, no statistically significant relationship was found between TAR and NIM, with p-values exceeding 0.05. Based on these findings, the study recommends that Palestinian banks continue investing in FinTech solutions to enhance operational efficiency and improve loan portfolio management, particularly given the positive impact of increasing technological asset ratios on improving the cost-to-income ratio, the bank's market share of credit facilities, and return on equity. Furthermore, banks should focus on leveraging FinTech in pricing their products and services, considering the lack of impact between the ratio of technological assets and the net interest margin of banks operating in Palestine. The study also recommended that policymakers strengthen regulatory frameworks to support the adoption of FinTech, ensuring a conducive environment for innovation and growth in the banking sector. Finally, future research should consider comparative and longitudinal studies to assess sector-wide challenges and opportunities related to FinTech adoption. These research approaches could provide deeper insights into the dynamics of FinTech adoption and integration across different contexts, uncovering more nuanced perspectives. Such studies would offer valuable guidance to policymakers, banking executives, and technology developers, helping them address evolving challenges and capitalize on the opportunities presented by FinTech in the banking sector.