Analysis of the Influence of Capital, Income and Liquidity on Banking Performance with Fintech as a Moderation

Abstract

This research examines the effects of Capital, Interest Income, and Liquidity on Financial Performance of the Bank during period of 2012-2022, taking into consideration the moderating role that FinTech plays in the relationship. Capital, as assessed via CAR which is Capital Adequacy Ratio, exhibits conflicting impacts on banking performance. It has a significant negative influence on profitability (ROA) and asset quality (NPL), but it has a good impact on efficiency (BOPO). Capital effects on different things ROA, NPL, and BOPO, however, becomes statistically negligible when FinTech is used moderately. The ratio that represents net interest income, known as the net interest margin, contributes considerably to an increase in profitability (ROA), but at the expense of the asset quality and operational efficiency. If FinTech is managed properly, its influence on ROA will be reduced, while the consequences it has on NPL and BOPO will become less significant. The Return on Assets (ROA) and Efficiency (BOPO) are both favorably affected by Liquidity, as assessed by the Loan to Deposit Ratio (LDR), while Asset Quality (NPL) is not significantly impacted. However, because of the moderation brought about by FinTech, the effect of liquidity on ROA, NPL, and BOPO becomes statistically irrelevant. Among our suggestions is the adoption of digital services for the purpose of boosting liquidity, the reduction of unproductive branch offices, the formation of collaborative partnerships with FinTech companies, and the improvement of regulatory control. This study reveals important insights into the rapidly changing world of banking and FinTech, which may influence strategies for achieving sustainable development