Does Institutional Quality Moderate Fintech’s Impact on Financial Development? Cross-Country Empirical Analysis

The rapid adoption of financial technology (fintech) is transforming the financial ecosystem. Understanding how these technologies influence financial development is crucial given that the institutional conditions shaping the fintech–financial development relationship remain insufficiently examined. To address this, a panel data regression model for 30 emerging and developing countries is utilized during 2011–2024 to examine the direct effect of fintech adoption on financial development and to test whether institutional quality moderates this relationship through an interaction-based FE/RE model, supplemented by country-specific marginal effect analysis. Composite indices are constructed to more accurately represent the levels of financial development, fintech adoption, and institutional quality. The results show that fintech adoption has a positive association with financial development at the average level of institutional quality and, as a more significant insight, this association becomes stronger as the level of institutional quality improves above a specific threshold level. The empirical strategy combines panel-wide econometric analysis with descriptive cross-country case studies to illustrate how the same conceptual mechanism manifests under different macro-financial and institutional contexts. Overall, a mechanism-focused interpretation of the fintech–financial development association is provided that emphasizes institutions as a central determinant of the pace and effectiveness of fintech adoption.