Third-party Payment and Commercial Banks in China: Friends or Enemies?

This paper explores the effect of third-party payment on the profitability of Chinese commercial banks from 2013 to the second quarter of 2020. In China, third-party payment has developed quickly in recent years, and an increasing number of people choose to pay by third-party payment instead of cash and bank card. This would have impacts on the Chinese traditional financial business, especially the banking industry. In order to find whether third-party payment impacts on commercial banks’ profitability or not, this paper selects the data of 36 listed banks for empirical analysis. The regression result shows that third-party payment has a significant positive impact on Chinese overall commercial banks. Then, for different types of banks, third-party payment has significant positive impacts on state-owned and joint-equity banks. But for urban and rural commercial banks, the regression results are poor fitting. Finally, this paper employs fixed effects model to run regressions, and results are still positive. Therefore, banks should continue to maintain a good corporative relationship with third-party payment.