Financial Technology Adoption and Bank Financial Performance: Evidence from Jordan

Abstract:

This paper investigates the relationship between FinTech adoption and bank financial performance in Jordanian commercial banks over the period 2010–2023. The analysis will focus on accounting-based performance, market-based performance, and the timing of performance effects as the main channels for considering the potential impact of FinTech, using fixed-effects panel regressions and dynamic-lead specification. The findings indicate that FinTech adoption has an insignificant immediate impact on bank profitability and market valuation. However, the dynamic analysis shows that FinTech adoption contributes positively to future financial performance. The findings indicate that operational performance, as measured by ROA, improves after a lag of two to three years, while shareholder returns (ROE) show positive responses at longer horizons. By contrast, the response of market-based performance, measured as Tobin’s Q, to FinTech adoption is tenuous and statistically insignificant, even in the long run. At a broader level, the results suggest that the FinTech adoption effect is time-structured and sequential, thereby rendering digital transformation as a long-run strategic investment rather than a short-run driver of profitability or market valuation. The study adds to the literature by providing dynamic evidence on the performance implication of FinTech adoption in an emerging economy banking market.