Empirical Study About The Impact Of Third-party Payment On The Profitability Of Commercial Bank

Ma Mingzhe,the chairman of Ping An insurance company of China,said in 2013: "in the next three years,the biggest rival of Ping An financial bank is not commercial bank or other traditional financial institution,but the Internet technology companies,such as Alibaba,Tencent".Internet finance will become a new way to engage in financial activities,in addition to traditional banking and securities markets.Thus,the Internet finance,especially Internet technology companies,plays an important role in the development of the global financial industry.Recently,China's Internet finance has developed rapidly,especially the third-party payment model.There is an explosive growth in the size of the transaction for Internet finance.Moreover,Internet finance has formed six main development models: third-party payment,P2 P network lending,Internet monetary fund,Internet financial services,digital currency and crowdfunding.In general,the development of Internet finance presents two major trends: first,the Internet technology companies are gradually carrying out the business services and other financial services;second,commercial banks are developing Internet financial products.Internet companies get a lot of user information because of the rapid development of electricity supplier services.They provide financial services based on users' financial preferences and needs.In fact,the development of Internet finance has brought opportunities for the development of commercial banks,while commercial banks are also facing the loss of customers and the loss of deposits.Not only commercial banks,other traditional financial institutions are also in need of reform,especially in the era of Internet finance.Internet companies provide professional financial loans and personalized financial services for more and more financial consumers,through the development of network platform,which means there is an overlap in business between the financial industry and the Internet industry.Literature that investigates the impact of third-party payment on the performance of commercial banks is scarce in China,especially for empirical studies.This study intends to fill this gap by estimating the impact of the third-party payment services on banks' profitability usinga sample of 13 Chinese commercial banks over the period 2004-2015.The profitability of banks is measured by return on equity(ROE)and the growth rate of third-party payment(GRTD)is employed to measure the development of transaction value.The empirical findings from this study suggest that the growth rate of third-party payment has a significant and positive impact on the profitability of commercial banks in China.According to the coefficient of variable ROE,bank profitability increases by about 0.1%(0.0092?0.01)when the transaction value of third-party payment increases by 10%.This study also includes other determinants which can influence the profitability of banks in the regression model.The empirical results indicate that capital adequacy,credit risk and GDP are negatively correlated to the profitability of commercial banks in China,while the impact of liquidity and inflation rate is positive.