Impact of financial inclusion and Fintech adoption on the bank risk taking – evidence from the banking system in Pakistan

Abstract

This study explores the relationship between fintech adoption (FTA) and financial inclusion (F. Incl), and between FTA/ F. Incl and the Default risk, leverage risk and portfolio risk. This study performed empirical analysis on DR, LR, and PR, as well as fintech adoption and F. It included data. This study performed PCA factor analysis and then examined the relationship between the variables using panel data regression with OLS. This study used the Firm size (FZ), GDP growth (Gr) rate and the Interest rate (Ir) as the control variables. This study found and concluded that a very positive relationship exists between fintech adoption and the F. Incl of the data. At the same time, the fintech and Interest rate have inverse relations with the DR, LR and PR. At the same time, the F.Incl and the Interest rate have inverse relations with the DR PR and LR of the firm. Future studies can be done with more bank samples or sectors and more economies in the sample. Further research can be possible by using Islamic banks for separate studies, a multivariate analysis technique, or qualitative data collection methods. This study has examined the impact of FTA and F. Incl on the bank risk in the presence of control variables which according to our information neither study has checked so far this study has used the fintech adoption which different from the other variables this study has examined the banking sector by taking three risks at a time which according to our best of knowledge neither study has studied.