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| Bank FinTech and the “Quantity Expansion and Quality Improvement” of Real Economy Investment: Credit Mechanisms and Service Boundaries |
| PENG Hongfeng, ZHANG Jingjing
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| School of Finance, Shandong University of Finance and Economics |
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Abstract In the context of sluggish global economic growth, the Chinese economy is facing increasing downward pressure, accompanied by weak corporate investment incentives, and slow fixed-asset investment growth. Revitalizing corporate investment requires not only sound policy arrangements that encourage firms to invest but also an effective financial system that enables them to obtain sufficient credit. In this context, improving banks' long-term lending mechanisms is essential for supporting investment in the real economy and promoting high-quality economic growth.
The rapid application of big data, cloud computing, artificial intelligence, and other digital technologies has made financial technology (FinTech) one of the most influential financial innovations. Within China's bank-dominated financial system, commercial banks have increasingly embedded FinTech into credit services, fundamentally reshaping lending decisions and risk management. Existing studies mainly examine how regional FinTech development affects corporate investment or focus on the financing function of bank FinTech. However, bank lending performs not only a financing function but also a monitoring function. Moreover, enhanced algorithmic risk assessment may unintentionally reduce credit accessto productive but risky firms. Whether bank FinTech innovation jointly affects corporate investment through credit financing, credit monitoring, and credit allocation remains largely unexplored.
Drawing upon financial intermediation theory, creditor monitoring theory, and investment substitution theory, this paper develops a unified analytical framework linking bank FinTech innovation to both the quantity and quality of corporate investment. We construct a bank-firm matched dataset based on the Bank Loan Details of Listed Companies from the Chinese Research Data Services Platform (CNRDS) from 2013 to 2023. Bank FinTech innovation is measured using a patent-based indicator identified through multiple cross-validation methods, including a FinTech dictionary, Latent Dirichlet Allocation (LDA) topic modeling, supervised machine learning, IPC classification, and manual verification. These data are merged with firm-level information from the China Stock Market & Accounting Research (CSMAR) database to examine the effects of bank FinTech innovation on corporate investment.
The empirical results reveal three main findings. First, bank FinTech innovation significantly increases corporate investment by improving credit accessibility and extending loan maturity. Additionally, strengthened credit monitoring reduces excessive cash holdings financed by bank loans and discourages firms from diverting credit funds into financial asset investment, thereby mitigating financialization and promoting real investment. Second, although bank FinTech innovation alleviates inefficient underinvestment among underinvesting firms through improved financing, it does not significantly enhance overall investment efficiency through stronger monitoring. Third, further analyses from the perspective of credit allocation show that FinTech-enabled precision risk control reallocates credit away from high-risk but highly productive firms toward low-risk but less productive firms. This allocation pattern weakens banks' incentives to conduct effective post-lending monitoring and limits the flow of credit resources to more productive firms, thereby constraining the positive effect of bank FinTech innovation on investment efficiency. These findings suggest that, to further harness the potential of FinTech in supporting the real economy and promoting high-quality financial development, it is essential to optimize FinTech-enabled credit monitoring and precision risk management mechanisms. Such improvements would facilitate both the expansion of investment and the enhancement of investment quality in the real economy.
The academic contributions of this paper are threefold. First, unlike previous studies that rely on regional FinTech indicators or text-based measures, we develop a patent-based measure of bank FinTech innovation using multiple cross-validation methods and identify its asymmetric effects on the quantity and quality of corporate investment at the bank-firm level. Second, we integrate the financing and monitoring functions of bank credit into a unified framework, providing new evidence on the micro-level transmission mechanisms through which bank FinTech innovation affects investment in the real economy. Third, by uncovering why bank FinTech promotes investment expansion but fails to improve investment efficiency, this study offers new insights into optimizing credit allocation under FinTech-enabled banking.
Future research may extend the analysis to non-listed small and medium-sized enterprises and explore the heterogeneous effects of bank FinTech innovation across different financial regulatory regimes and market structures through cross-country comparisons.
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Received: 22 January 2026
Published: 19 October 2026
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