Financial technology and banking performance in developing countries: evidence from an advanced quantile regression approach
Muhammad Iatzaz Ul Hassan, Mengyun Wu, Jie Lu, Jan Muhammad Sohu, Shoaib Ali, Hafiz Naveed Anjum, Muhammad Bilal
Abstract
Abstract FinTech has emerged as a transformative force in the global banking industry, especially in developing economies where digital solutions are rapidly redefining financial access, efficiency, and competition. Despite its growing relevance, empirical research remains limited regarding the heterogeneous effects of FinTech on banking performance and the role of institutional quality in shaping these outcomes. This study investigates the impact of FinTech adoption on bank performance in 33 developing Asian countries from 2010 to 2022 while assessing the moderating effect of economic governance. Using the Method of Moments Quantile Regression and Bootstrapped Quantile Regression, the analysis captures distributional dynamics and robustly estimates relationships across different levels of bank performance. Findings reveal a consistently positive and statistically significant impact of FinTech on bank performance, particularly in lower-performing banks, suggesting that FinTech fosters financial inclusion and competitiveness. Economic governance is also shown to exert a direct and positive influence, especially in institutional environments where regulatory stability and accountability enhance operational outcomes. Furthermore, the interaction between FinTech and governance is significant, indicating that stronger institutional frameworks amplify the beneficial effects of FinTech. These results are stable across various quantiles and robust to alternative specifications. The study offers critical insights for policymakers and financial regulators, emphasizing the need for synchronized development of digital financial infrastructure and governance frameworks to maximize performance gains in the banking sector. In light of the COVID-19 pandemic’s role in accelerating digital adoption, the findings underscore the importance of institutional resilience in mitigating associated risks. This research contributes to the ongoing discourse on digital finance and economic development by integrating technological innovation and institutional quality into a unified empirical framework, offering actionable recommendations for sustainable banking reforms in developing regions.