This paper investigates the impact of financial technology innovation on bank performance. Using a large sample of FinTech mergers and acquisitions (M&A) deals by major and regional US banks as well as artificial intelligence (AI) patent applications and grants by banks from 2010 to 2022, their impact on bank return on assets (ROA) and return on equity (ROE) is explored.
System GMM estimators created for dynamic panel models are employed to evaluate the impact of a bank’s acquisitions of technology-oriented, AI and FinTech corporations and the filing of technology-oriented patents on profitability.
A positive association between the number of FinTech M&A deals and bank performance is documented; however, none of the patent variables (grant, filing or publication) appear to have a significant effect.
A large sample of FinTech M&A deals and patents by US major and regional banks is used to study the impact on bank performance. A comprehensive empirical analysis is performed while controlling for bank size and other bank characteristics.
