FinTech and financial development: the role of traditional financial institutions

Abraham Emuron, D.P. van der Nest and Cephas Paa Kwasi Coffie

African Journal of Economic and Management Studies, 2024, vol. 15, issue 4, 704-719

Abstract: Purpose - This paper employs data from the World Bank to examine the effect of traditional banks on FinTech and financial development in the Southern African Development Community (SADC) region. Design/methodology/approach - The study employs the Generalized Method of Moments (GMM) as the primary data analysis method. Findings - The findings of the study demonstrate a bi-directional relationship between traditional financial institutions and FinTech. Traditional financial institutions are observed to facilitate the adoption of FinTech solutions, whilst the disruptive effects of FinTech incentivize traditional banks to adapt to the changing financial landscape and tailor their service and product offerings to reflect recent technological advancements. Consequently, there exists a positive relationship between traditional financial institutions and financial development in the SADC region. Practical implications - Our findings suggest the need for market liberalization and enhanced institutional quality controls for policymakers. Traditional banks must adapt their business models and incorporate FinTech solutions to remain competitive and relevant. Collaborative partnerships between traditional banks and FinTech firms have emerged as a practical approach to leverage the strengths of both sectors. Originality/value - This is one of the first studies to examine the role of traditional financial institutions in FinTech and financial development using GMM in the SADC region.

Keywords: FinTech; Financial development; SADC; Generalized method of moments (GMM); Traditional banks; B16; F65; O55 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ajemsp:ajems-10-2023-0406

DOI: 10.1108/AJEMS-10-2023-0406

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