A quantitative analysis study of FinTech on banks’ operational efficiency and risk management based on Monte Carlo simulation

Fintech has not only greatly improved the operational efficiency of banks by introducing cutting-edge technologies such as big data, artificial intelligence, and blockchain, but also posed new challenges to banks’ risk management. This paper uses Monte Carlo simulation to explore the impact of fintech on banks’ operational efficiency and risk management. A VaR data model is used to analyze the impact of fintech on the operational efficiency of three types of commercial banks: big five banks, joint-stock banks, and city commercial banks. The non-performing loan ratio of China MS Bank is used as the empirical object for quantitative analysis of bank risk management. Monte Carlo simulation is used to realize the VaR calculation of banks’ NPL ratio. The empirical analysis finds that the impact of fintech on the operational efficiency of all three types of commercial banks is relatively significant, but there are differences in direction and lag period. Meanwhile, FinTech increases banks’ NPL ratio. It shows that fintech has a negative impact on bank risk management, for this reason, this paper develops relevant strategies to deal with the risk challenges brought by fintech according to bank types.