Determinants of Fintech Adoption: Panel Data Evidence from Developing Countries

Abstract

FinTech adoption has expanded rapidly, but its development remains uneven across developing countries because digital infrastructure, economic capacity, institutional conditions, and macroeconomic environments differ substantially. This study investigates the determinants of FinTech adoption using annual panel data for selected developing countries over 2010–2023. The analysis examines GDP per capita, internet penetration, regulatory quality, and interest rates using static and dynamic panel-data methods. Static specifications are evaluated through pooled ordinary least squares, random effects, and fixed effects, followed by diagnostic tests and Driscoll–Kraay robust standard errors. Dynamic specifications are estimated using difference and system Generalized Method of Moments (GMM), with the Two-Step System GMM model selected on the basis of the reported Hansen test. The static results indicate that GDP per capita and internet penetration are positively associated with FinTech adoption, while regulatory quality and interest rates are not statistically significant in the preferred Driscoll–Kraay fixed-effects specification. The dynamic results show strong persistence in FinTech adoption, a positive and significant effect of GDP per capita, and negative and significant effects of regulatory quality and interest rates, while internet penetration is positive but statistically insignificant. The findings indicate that FinTech adoption is shaped by economic capacity and technological access, while institutional and macroeconomic effects become more evident when persistence and potential endogeneity are considered.