The impacts of FinTech credit development on banking stability, broad-based financial development, and growth: global evidence

The study examines the impact of Fintech credit flows on global banking stability, broad-based financial development, and growth. Fintech and big tech credit flows are favorable to global banking stability, with a predicted increase (decrease) in bank Z-score (non-performing loans). Commercial banking systems present a predicted decrease in after-tax profitability. Increased Fintech and big tech credit flows present a predicted decrease in one year-ahead GDP growth. Global financial development presents marginal growth and the broad-based development of financial institutions and markets. FinTech and big tech credit flows decrease financial institutions' access and financial market efficiency. Economies with the highest fintech credit flows present a predicted increase in financial instability of commercial banks. The development of financial markets and institutions is sensitive to fintech and big tech credit flows. The findings offer global and thorough evidence on the multifactorial impacts (opportunities and threats) of fintech and big tech credit flows on banking stability, broad-based financial development, and global growth. Our global evidence on the effects of Fintech credit flows is validated through diverse modelling approaches, including Arellano-Bond linear dynamic panel-data estimations with GMM-type robust standard errors, random-effects models using generalized least squares (GLS), and panel fixed-effects (FE) models with a Hausman specification test for optimal model choices. Employing GDP growth as the exogenous factor along with diverse bank-related characteristics and financial development indicators for the endogenous testing factors, the study validates the contributions of Fintech credit to global financial stability with two-stage least-squares random-effects using the instrumental variables (IVs). Our findings complement earlier studies, offering critical policy implications and future research directions.