Digital Pathways to Stability: A Cross-Country Analysis of the Fintech–Inclusion–Stability Nexus Across Selected Countries

This paper examines the impact of fintech adoption and financial inclusion on financial stability in selected countries. Using panel data from 30 countries spanning 2011–2024, the study employs an empirical strategy based on Two-Way Fixed Effects, a dynamic two-step System GMM estimator, and Panel Quantile Regression. This multi-method approach captures both average and distributional effects while addressing key econometric challenges, including endogeneity, heteroskedasticity, serial correlation, and cross-sectional dependence. The empirical findings differ across estimation techniques but reveal two consistent patterns: financial inclusion exerts a positive and significant effect on financial stability across all models, whereas the impact of fintech is model-dependent. While fintech appears insignificant under the Two-Way Fixed Effects and Driscoll–Kraay specifications, the System GMM and quantile regression analyses confirm that both fintech and financial inclusion significantly enhance financial stability. Overall, the results show that fintech can boost financial stability, but only when supported by broad financial inclusion and solid institutions. The findings highlight that policymakers must pair the growth of digital finance with clear regulatory standards and programs designed to deepen financial inclusion.