The Impact Of Internet Finance On The Profitability Of Commercial Banks

In recent years,benefit from the rapid development of Internet technology and e-commerce and the blind areas of traditional financial services and supervision,Internet finance suddenly rises in China.A lot of new financial models like third-party payment,mobile payment,e-commerce small loan,supply chain finance,P2P loan and crows funding are emerging.Internet finance has grown rapidly as a new force in the financial sector and China has become the world’s largest Internet finance economy in just a few years.Along with the rapid development of Internet finance,more and more people have expressed their worries about the future of commercial banks.It is undeniable that with the modern technology like large data,cloud computing and search engines and other advantages like low transaction cost and less information asymmetry,Internet finance has enrich the financial business types and broaden the financial service channels.It has already occupied a place in the field of financial development and innovation and shaken the traditional financial monopoly in China.The Internet has already had a devastating impact on the traditional industries,such as letters,newspapers and CD.Will the traditional financial industry be the next one?We must think about it very carefully.Therefore,this paper makes a research on the relationship of Internet finance and commercial banks’ profitability.Based on the modern financial intermediation theory,long tail theory and financial function theory,this paper makes it clear that by replacing the intermediary,deposit and loan business,the Internet finance has broken the profit model of commercial banks and thus seizing their profits.After analyzing the intrinsic mechanism,this paper constructs a panel data model based on the data of 16 listed banks in China during the year 2010-2015 to make a empirical analysis.This paper uses ROE to measure the profitability of commercial banks and uses third-party payment,P2P loan and crows funding to measure Internet finance respectively to make different models.All the empirical results from the different models show that Internet finance will reduce the profits of commercial banks.In addition,this paper also provides strategies for commercial banks to help them resist the negative impacts and survive in the future with the rapid development of Internet finance.