Anchoring Stability: FinTech’s Revolution in Modern Banking

Amid the rapid digital transformation of the financial sector, technological advancements are reshaping traditional banking practices. This study investigates the relationship between FinTech credit and bank stability, proxied by Credit Risk Distance (CRD), within the global banking sector. Specifically, we examine whether FinTech credit increases competitive pressures and financial risk, or whether traditional banks are effectively adapting to these digital disruptions. Using panel data estimation techniques with firm and country-year fixed effects, our results show that increased FinTech credit is associated with higher CRD, indicating a lower likelihood of default and a potential stabilizing effect on bank risk. Sub-sample analyses further compare distressed versus non-distressed banks, as well as highly leveraged versus less-leveraged institutions. Robustness of the findings is confirmed using the System Generalized Method of Moments (System-GMM). These findings contribute to the emerging literature on FinTech and financial stability and offer practical implications for policymakers, bank executives, and investors navigating the evolving digital financial landscape.