Does Bank Size Matter in the Fintech–Risk Nexus? Evidence from South Asian Banking Sector

This paper examines the impact of Fintech investment intensity on risk taking behavior of commercial banks in South Asia. It also evaluates the extent to which bank size moderates the relationship between Fintech investment intensity and risk-taking behavior. The secondary data is gathered for 90 listed commercial banks from seven South Asian countries between 2010 and 2024, yielding up to 1,350 bank-year observations. Fintech investment intensity index is constructed uniquely using PCA approach for the measurement of Fintech investment intensity followed by the adoption of established measures for other variables in the study. The econometric approach includes diagnostics testing and application of dynamic GMM models. Least squares dummy variable corrected model is employed as robustness test. The findings reveal negative and significant impact of Fintech investment intensity on banks risk taking behavior. Bank size moderates this relationship such that the risk-reducing effect of Fintech investment intensity weakens in larger banks. This implies that banks should prioritize sustained Fintech investment as a strategic risk management tool, while regulators can promote technology adoption particularly among larger banks to enhance financial stability without increasing risk-taking incentives. The results offer evidence-based recommendations to banks and regulators that enduring financing in Fintech can be used as a risk alleviation tool in ensuring financial stability within developing banking systems like South Asia. The analysis of Fintech investment intensity as determinant of banks risk taking and its index development are novel contributions of this work.