Exploring the Effect of Fintech on Liquidity creation of Banks: Evidence from Vietnam

Absztrakt (kivonat)

In the context of increasing concern about financial stability and the role of technological innovation in shaping the banking sector, there is growing interest in understanding the impact of Fintech on liquidity creation among banks, particularly in emerging markets like Vietnam. This paper aims to investigate the relationship between financial technology (fintech) adoption and banks’ liquidity creation in Vietnam. The study is based on a bank-level panel dataset from 23 listed commercial banks in Vietnam from 2010 to 2022, comprising 276 firm-year observations. Through text analysis approach, we construct Fintech index by using Python to extract keywords related to fintech from the annual reports of the listed banks. Using a two-way fixed effect regression model, the empirical results suggest that fintech adoption significantly enhances the liquidity creation capabilities of Vietnamese listed banks. Banks with a higher level of FinTech adoption generated more liquidity creation on the assets-side, liabilities-side, as well as total liquidity creation. Moreover, heterogeneity analysis suggests that the association between fintech adoption and bank liquidity creation is not dependent on the bank's size, capital ratio, or market power. The study contributes by uncovering the substantial positive impact of fintech adoption on liquidity creation among listed banks in Vietnam, offering policymakers insights to promote fintech adoption and advance regulatory frameworks to support innovation in the banking sector.