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Analysis of constraints and their impact on adopting digital FinTech techniques in banks

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Abstract

This study aims to investigate the effect of constraints; regulatory, technological, political, economic, and cultural, on the adoption of FinTech in banks through techniques of FinTech; artificial intelligence, big data, cloud computing, and blockchain in Yemen. The information for this study was collected through a questionnaire that included 332 respondents and was analyzed at the managerial level for 361 bank branches. Structural equation modeling through PLS, a disjoint two-stage approach, was used to approve the model's constructs. The study results reveal a significant negative effect of the constraints on adopting FinTech in banks. Technological, economic, and political constraints negatively affect banks' adoption of digital FinTech techniques. But regulatory and cultural constraints have an insignificant effect. This study may be important for specialists and those interested in FinTech development and valuable for decision-makers to address obstacles and keep pace with financial technology developments in Yemen.

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Authors and Affiliations

  1. Department of Business Administration, Thamar University, Dhamar, Yemen

    Hussein Ahmed Alshari

  2. Department of Commerce, Dr. Babasaheb Ambedkar, Marathwada University, Aurangabad, India

    Hussein Ahmed Alshari & M. A. Lokhande

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  1. Hussein Ahmed Alshari
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Correspondence to Hussein Ahmed Alshari.

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Appendix

Appendix

Constructs

Indicator and item

Source

Adoption FinTech

Artificial intelligence

The bank's software system provides advisory services to customers digitally related to periodic financial operations without human intervention

[23] [26]

The bank's software system (via artificial intelligence applications) can digitally predict future financial conditions without human intervention

The bank's software system can digitally detect fraud and electronic crimes without human intervention

The bank's software system provides the necessary digital alerts and guidance management of potential risks without human intervention

Big data

The bank's software system analyses customer data electronically without human intervention to determine customer trends and behaviors

[93] [94] [35]

The bank's software system organizes customers' data and divides them into similar groups electronically without human intervention

The bank's software system analyses the habits and behaviors of customers electronically. When different habits and behaviors emerge, it sends customers to verify their personalities electronically without human intervention

The bank's software system links customers' data with social media and analyzes them electronically without human intervention

Cloud computing

The electronic bank system provides the service of conducting financial transactions through the mobile application from more than one device (laptop, tablet, iPad, desktop computer, etc.) via the internet

[40, 42]

The bank's software system provides the service of allowing or suspending any device (phone, laptop, tablet, iPad, desktop computer, etc.) to electronic financial transactions through the payment application

Blockchain

The bank's software system provides smart contracts, programs, or programmatic instructions that automatically implement the contract's terms and conditions without human intervention

[95] [96]

The bank's software system uses Intelligence records technology that anyone manages and is not subject to modification or change

The bank's software system maintains smart asset records, enabling the tracking of assets in all their stages without human intervention

Regulatory constraints

There is a lack of adequate laws and regulations that suit the characteristics of modern digital financial technology

[97,98,99]

The bank must amend existing laws and regulations to protect clients and data privacy against tampering and cybercrime

Banks face the challenge of not changing laws and regulations to protect them from perpetrators of electronic crimes while using digital financial technology

Banks face the challenge of not having a regulatory laboratory to examine electronic financial applications

There is a weakness in the continuous electronic supervision rules by the Central Bank to monitor financial and banking operations electronically

Technological constraints

Clients face a decrease in the speed and spread of the internet in most regions of Yemen

[50] [100]

Information security, privacy, and protection of clients' data are considered one of the most critical challenges

Banks face difficulty adapting old IT infrastructure to the requirements of modern digital technology

Banks face a challenge in finding software and applications that can be trusted

Banks have difficulty verifying and authenticating the client's identity digitally

Political constraints

The turbulent political situation contributes to discouraging banks from investing in financial technology

[91]

The turbulent political situation makes individuals, companies, and organizations adopt digital financial transactions less

Banks face difficulty in doing their work during political conflicts

Government encouragement of banks Lowly to adopt financial technology to contribute to financial inclusion

Political conflicts hinder the provision of an appropriate environment for banks to develop their financial services technologically and digitally

Economic constraints

Financial and economic instability leads to decreased banks' investment in financial technology

[91]

Local currency exchange rate fluctuations lead to lower clients' use of electronic financial services

The lack of cash in banks leads to clients' lack of confidence in electronic financial services

The division of supervision by the Central Bank hinders the modern technological development of the banking sector

Few monetary policies hinder banks from adopting financial technology

Cultural constraints

Clients' declining awareness of the benefits of using modern electronic financial services

[11]

Many clients prefer to use cash during their financial transactions

There is a decline in banking culture's importance in developing their financial services electronically, digitally, and continuously

The central bank's orientation to keep pace with the development and digital technological innovations has declined

Low clients' confidence in electronic financial services hinders using such services

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Alshari, H.A., Lokhande, M.A. Analysis of constraints and their impact on adopting digital FinTech techniques in banks. Electron Commer Res (2023). https://doi.org/10.1007/s10660-023-09782-6

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