Prometheus Unbound: What Makes Fintech Grow?

IMF Working Papers, February 21, 2025

Source details

Research question: What makes fintech grow and why do some countries have more financial innovation than others?
Scope: Comprehensive dataset covering a diverse panel of 98 countries over the period 2012–2020.
Approach: Empirical analysis to ascertain economic, demographic, technological, and institutional factors that enable fintech development.
Core conclusion: Policies and structural reforms can help promote financial innovation and cultivate fintech ventures—particularly by strengthening technological and institutional infrastructures and reducing cybersecurity threats.

The emergence and spread of fintech are associated with multiple factor categories:
- Economic factors
- Demographic factors
- Technological factors
- Institutional factors
The magnitude and statistical significance of these factors vary according to:
- The type of fintech instrument
- The level of economic development (advanced economies vs. developing countries)

Heterogeneity in drivers:
- Different fintech instruments respond differently to the identified economic, demographic, technological, and institutional factors.
- Advanced economies and developing countries exhibit different magnitudes and statistical significance for these drivers.

Strengthen technological infrastructure to support fintech development.
Reinforce institutional infrastructure to foster financial innovation.
Reduce cybersecurity threats to enable the growth and spread of fintech ventures.
Implement policies and structural reforms tailored to country-specific development levels and fintech instrument types.