<p>This paper aims to examine the impact of financial technology development (FinTech) on the profitability of conventional and Islamic banks listed on the Palestine Stock Exchange (PEX) during the period 2015–2022. The impact of FinTech development on bank profitability was examined using panel data regression of 13 Palestinian conventional and Islamic banks listed on the PEX using a fixed effect estimate. The results were tested for robustness and reliability using the two-stage least squares test (2SLS). The findings indicate that the performance of banks and the advancement of FinTech are strongly correlated, or that the former significantly worsens the latter. The results remain consistent when different endogeneity-based FinTech and bank profitability indices are used. This is the basis for examining the heterogeneity component of the previously mentioned relationship, which shows that the absence of monetary policy reduces the negative effects of FinTech on bank profitability. Moreover, there is a sufficient counterbalance to the detrimental effects of FinTech on the operations of powerful, monopolistic Islamic and conventional banks. This study contributes to the body of literature by using the Comprehensive Digital Finance Index (DFI) created by the Digital Finance Research Centre at Peking University. FinTech is the term for innovative financial products and services creation and delivery through technology. Examining the extent of its influence on the banking sector, particularly on conventional and Islamic banks, is fascinating. This paper contributes and adds to the body of knowledge and stands out for employing the Comprehensive DFI method, a novel technique for gauging the level of external FinTech development in a sample of conventional and Islamic banks.</p>