Professor Mingzhu Tai
12 August 2026

At present, the development and application of financial technology (fintech) and digital finance are no longer confined to non-bank fintech companies and large internet platforms. In fact, traditional commercial banks, which still firmly occupy a dominant position in the market—especially many large commercial banks—have invested heavily in the development and application of cutting-edge financial technologies. Some data show that, in recent years, the technology investment levels of many systemically important banks around the world have even been comparable to those of major technology companies such as Google and Amazon. Meanwhile, senior executives of various banks have publicly emphasized the importance they attach to fintech development. For example, Michael Corbat, former CEO of Citigroup, once stated, “We see ourselves as a technology company with a banking licence.” Senior executives at other banks, including JPMorgan Chase, have made similar remarks.

The potential positive impact of fintech

When fintech and digital development were still driven primarily by internet platforms and emerging fintech companies, it was generally believed that fintech could have a positive effect on financial inclusion. First, with the support of technology, financial institutions can substantially reduce operating costs, thereby lowering the prices of financial services and credit in a competitive environment. Second, technological development can extend institutions’ market reach and coverage and increase overlap among institutions across various market segments. This is conducive to strengthening market competition and reducing the monopoly power of leading institutions in the market.

However, when traditional commercial banks began to adopt fintech and digital applications, their effect on financial inclusion in the market remains unclear. On the one hand, the popularization of digital financial services rendered by banks can also play an effective role in reducing operating costs and promoting market competition, thus becoming a favourable factor in advancing financial inclusion. Moreover, in recent years, the impact of the COVID-19 pandemic has led to a surge in customer demand for online banking services, further promoting the widespread adoption of digital financial services. This has also improved the efficiency with which customers can switch between institutions, helping them fully compare competing products and services offered by different institutions and choose the best option, thereby exerting a positive effect on financial inclusion.

Furthermore, in traditional banking activities, employees responsible for providing financial services or making decisions may be influenced by subjective biases, which can in turn affect financial inclusion for specific groups, such as ethnic minorities, women, and low-income groups. For instance, some studies indicate that when financial advisors deal with female clients, they tend to give investment advice that is inferior to that given to male clients under comparable circumstances. When banks use automated intelligent algorithms and processes in place of human employees, such subjective biases may be avoided, enabling banks to offer services to different types of customers on a more equitable basis.

The potential negative impact of fintech

On the other hand, in recent years, the academic community and regulators have raised several potential concerns regarding the development and application of fintech by banks. First, different types of banks vary considerably in the extent and direction of their investment in and application of fintech. In particular, compared with small and medium-sized banks, large banks are better able to achieve economies of scale in their fintech investments and generate competitive advantages in risk management, cross-selling, and many other business activities. This gives rise to a significant “Matthew effect” in the development of fintech and digitalization between large and small financial institutions in the market. Based on my preliminary observations of detailed micro-level data from the US market, I have also found that banks’ level of technological development is highly correlated with indicators such as asset size, funding costs, profitability, and the share of retail business, and that there is a highly pronounced leading-firm effect. In addition, large banks have achieved rapid technological development and breakthroughs through extensive acquisitions of fintech start-ups. This uneven pattern of fintech advancement could lead to bank market shares becoming further concentrated among large institutions and may ultimately intensify consolidation in the banking sector through mergers and acquisitions of small and medium-sized institutions by large banks. Take the US as an example. The number of commercial banks fell from more than 2,000 in 1995 to just around 500 in 2016. Meanwhile, the Herfindahl–Hirschman Index (HHI) of the banking market has risen significantly. This trend is especially concentrated at the top of the industry: the four major American banks—JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo—account for 44% of the industry’s total profits, and the valuation gap between leading banks and other banks is gradually widening. In the long run, this trend may further increase the market dominance of the leading banks and thereby have an adverse effect on financial inclusion.

Second, under the traditional financial business model, regulators may restrict the provision of differentiated financial services or the making of credit decisions based on customers’ social labels, such as gender, race, and native place. Nevertheless, when financial institutions use advanced machine-learning methods for assessment and decision-making, these automated systems may indirectly infer customers’ social identities from other information, and such algorithm-based indirect inferences are difficult for regulators to detect. This may exacerbate unequal outcomes in the allocation of financial services and credit resources. In addition, because advanced algorithmic models including machine learning and artificial intelligence still need to be trained on human-generated data, the decisions made by these models are unlikely to be entirely free from the biases and discriminatory practices that may exist among human decision-makers. As a result, it may remain difficult to achieve fairness and inclusion in financial services.

Overall, it remains unclear whether the technological and digital transformation of traditional commercial banks have a positive or negative effect on financial inclusion. One possible hypothesis is that, in the initial stages of banks’ fintech and digitalization development, institutions that take the lead in digital finance can effectively extend their market reach, thereby increasing competition in local financial markets, lowering the prices of financial services, and promoting financial inclusion. However, as financial institutions with technological and digital advantages gradually capture market share and even engage in mergers and acquisitions, the monopolistic position of a small number of institutions may ultimately strengthen and lead to higher prices for financial services, thereby potentially having an adverse effect on financial inclusion. Only through continued observation and evaluation of industry activity can we reach a conclusion on how the market will ultimately develop.