The Contingent Effect of Fintech Development on Banking Performance: Evidence from a Cross-Country Ecosystem Perspective

BackgroundThe rapid expansion of Fintech has produced mixed effects on banking performance, suggesting that its benefits depend on the institutional and market environment.PurposeDrawing on Contingency Theory and Ecosystem Theory, this study examines the impact of Fintech development on banking performance and investigates how internal conditions and ecosystem characteristics—including digital penetration, innovation capacity, financial development, financial inclusion, governance, and banking concentration—moderate this relationship.MethodologyUsing a panel of 188 countries covering the period 2015–2023, the study distinguishes between Fintech adoption and Fintech use as complementary dimensions of Fintech development, and banking performance is assessed through efficiency, profitability, and stability indicators. The empirical analysis employs Driscoll–Kraay fixed-effects, System GMM, and quantile regression.FindingsThe findings indicate that Fintech development does not generate uniform banking outcomes. Fintech adoption generally improves profitability and stability. The relationship is strongly conditioned by national ecosystem characteristics. Digital penetration and banking concentration strengthen Fintech's benefits, while financial development often reduces them. Innovation capacity, financial inclusion, and economic governance exhibit heterogeneous moderating effects across performance dimensions. Quantile regression further reveals substantial heterogeneity, showing that supportive ecosystem conditions are particularly beneficial for weaker banking systems, whereas stronger systems frequently experience diminishing returns or greater stability trade-offs.ImplicationsThe findings suggest that policies promoting Fintech alone are insufficient to improve banking performance. Policymakers should simultaneously strengthen digital infrastructure, financial inclusion, innovation ecosystems, and governance frameworks to maximize the benefits of digital financial transformation while safeguarding financial stability.OriginalityBy integrating Contingency Theory and Ecosystem Theory, this study provides a comprehensive cross-country analysis of how ecosystem conditions shape the effects of Fintech on banking performance, explaining why the Fintech–banking performance relationship differs across countries and banking systems.