International Journal of Transformations in Business Management

International Peer Reviewed (Refereed), Open Access Research Journal

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Abstract

FinTech Diffusion, Banking Competition, and Financial Stability: A Global Panel Study

Hadeer Khayoon Ashour

Assistant Professor, Department of Financial and Banking Sciences, College of Administration and Economics, University of Kerbala, karbala, Iraq,

35-49 Vol: 16, Issue: 3, 2026
Receiving Date: 2026-04-12
Acceptance Date: 2026-05-21
Publication Date: 2026-07-19
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http://doi.org/10.37648/ijtbm.v16i03.003

Abstract

The study questions the impact of the FinTech diffusion on the competition in banking and financial stability, using a worldwide panel data covering developed and developing economies between 2006 and 2023. Using Fixed Effects, Random Effects and System Generalised Method of Moments (System-GMM) estimations, the analysis studies the processes by which digital financial innovation transforms market structure and risk process in banking systems. The research data indicate that the diffusion of augmented FinTech grows banking competition, which is reflected in the reduced market power and the rise of efficiency. At the same time, the research discloses a less evident connection with the financial stability: on one hand, as it enhances bank stability through risk management and operational efficiency, FinTech use may encourage an increase in risk-taking, specifically in the emerging markets. Besides, the findings point to a significant cross-country heterogeneity which is a consequence of a regulatory capacity and institutional quality differences, hence providing relevant policy implications to design balanced regulatory frameworks that will foster FinTech innovation but ensure financial stability. Increased competitive pressure may reduce banks’ profit margins and franchise values, motivating financial institutions to expand risky lending activities in order to maintain profitability and market share.

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