The nonlinear nexus between fintech startups and bank stability: evidence from the Indian economy
Satpreet Kaur, Rajeev Kumar PandaPurpose
The emergence of fintech startups is revolutionizing the financial landscape while challenging the stability of traditional banks. This study examines the nonlinear relationship between the proliferation of fintech startups and the stability of banks in India, with the moderating role of relative bank size.
Design/methodology/approach
The study utilizes panel data from Indian banks spanning 2008–2023. A feasible generalized least squares method is chosen for its ability to address heteroscedasticity and autocorrelation to test the hypothesized relationship. The findings are further validated through multiple robustness and verification checks.
Findings
The findings present a nonlinear relationship between fintech proliferation and bank stability. The moderate range of fintech growth is associated with strong stability indicators, whereas higher levels coincide with weaker stability outcomes within the sample period. The relationship appears to be heterogeneous, with bank size conditioning the vigor and persistence of the observed relationship.
Practical implications
The findings suggest that regulators and bank managers may benefit from close monitoring of the pace and structure of fintech expansion. The relative-scale differences emphasize the significance of adaptive governance, as well as supervisory oversight in evolving fintech ecosystems.
Originality/value
This study provides novel evidence from India by examining threshold effects in the fintech-bank stability relationship and explicitly modeling size as a moderating factor within a rapidly evolving fintech ecosystem. The findings provide exploratory evidence and encourage subsequent research.