IMF Working Papers

The rise of financial technologies—fintech—could have transformative effects on the financial landscape, expanding the reach of services beyond the confines of geography and creating new competitive sources of finance for households and firms. But what makes fintech grow? Why do some countries have more financial innovation than others? In this paper, I use a comprehensive dataset to investigate the emergence and spread of fintech in a diverse panel of 98 countries over the period 2012–2020. This empirical analysis helps ascertain economic, demographic, technological and institutional factors that enable the development of fintech. The magnitude and statistical significance of these factors vary according to the type of fintech instrument and the level of economic development (advanced economies vs. developing countries). Finally, these findings reveal that policies and structural reforms can help promote financial innovation and cultivate fintech ventures—particularly by strengthening technological and institutional infrastructures and reducing cybersecurity threats.