Does financial technology and innovation promote bank performance? Evidence from COMESA member countries

Abstract

This study examines the impact of financial technology and innovation on bank performance in the Common Market for Eastern and Southern African from 1997 to 2022. Previous studies provide inconsistent results on the impact of financial technology and innovation on bank performance. These conflicting findings have motivated research. The autoregressive distributed lag method was used. Bank performance measured by return on asset and return on equity, financial technology measured by mobile banking and internet banking, innovation proxied by automated teller machines, point of sale, mobile payment, and mobile money. The results unveil a long-run relationship among the series. The findings indicate that financial technology and innovation impact bank performance positively. Investments in financially innovated technologies in legally regulated banking systems should be encouraged to boost bank performance via tax incentives. Governments and bank managements should implement policies that protect investments in financial technology and innovation to motivate banks performance by reducing taxes on mobile technology gadgets. These policies would transform the banking systems of these countries, thereby boosting the economies regionally and globally. This paper contributes to literature by supporting that financial technology and innovation impact bank performance positively.