The Impact of Fintech on the Performance of Islamic and Conventional Banks in Banking Sector of Pakistan and Bangladesh

Abstract

This thesis investigates the impact of financial technology (fintech) on the performance of Islamic and conventional banks in the banking sectors of Pakistan and Bangladesh. With the rapid advancement of technology and its increasing influence in the financial industry, understanding how fintech affects the performance of different types of banks is of crucial importance. The study employs a panel data approach and includes a sample of 20 banks from each country from 2013 to 2021. Bank performance is measured using key financial indicators such as Return on Assets (ROA) and Return on Equity (ROE) (ROE). Banks' adoption and utilisation of fintech is measured using variables related to digital banking services, mobile banking applications, online payment systems, and other technological innovations in the banking sector. The empirical analysis employs the Panel EGLS (Cross-section random effects) method to account for both cross-sectional and time-series variations. The results indicate a significant relationship between fintech adoption and bank performance. It is found that banks embracing fintech innovations experience improvements in their performance metrics, including ROA and ROE. The study also investigates the differences in the impact of fintech on Islamic and conventional banks. The findings show that the impact of fintech on bank performance varies between the two types of banks, owing to their distinct business models and customer preferences. This data can help policymakers and industry stakeholders devise strategies to maximise the benefits of fintech adoption in each banking sector. It enables bank executives, regulators, and policymakers to make informed decisions about technological advancements in the banking sector.