Does Operational Risk Management Benefit from FinTech?

We discover the impacts of FinTech on operational risk in the context of Chinese commercial banks from 2008 to 2019. Based on the massive amount of data collected manually, we find that FinTech and its subtypes, except for mobile internet, significantly reduce operational risk. Specifically, the baseline results reveal that for one unit increase in the FinTech index, the decrease in operational risk is about 1.414 units. For different types of FinTech, artificial intelligence (AI) has the most significant impact on operational risk, and for an increase of one unit of the AI index, operational risk is reduced by 4.033 units. Moreover, we find that the impact of FinTech on operational risk mainly comes from the interest, leases, and dividend component and the services component; the influence of FinTech on operational risk is greater in state-owned banks compared to other commercial banks with other ownership structures. Our main results hold for an array of endogeneity and robustness tests.