The impact of financial technology (fintech) on financial performance under the moderating role of capital adequacy requirements in Egyptian banks

Abstract Purpose This research aims to determine the moderating effect of the capital adequacy ratio (CAR) on the relationship between financial technology (FinTech) and sustainable financial performance in the Egyptian banking sector. Design/Methodology/Approach The study was conducted on a sample of 30 banks from the Egyptian banking sector over the period from 2016 to 2024. The data were analysed using a fixed effect approach. Finding The study concluded that FinTech has a positive impact on the financial performance of Egyptian banks. It found that the cost of software automation has a minimal impact on liquidity, while it negatively affects profitability, leverage, and dividends. High costs have a negative impact on banks’ financial performance due to increased operating expenses and the costs of adapting to new technologies. The ATMs have a significant impact on profitability and leverage, while having a negative impact on liquidity and dividends. Conversely, the number of credit cards and branches positively impacts liquidity, profitability, leverage, and dividends. Therefore, the greater the number of ATMs, credit cards, and branches, the better the banks’ financial performance. Furthermore, the CAR mitigates the impact of FinTech on financial performance, transforming the negative impacts of liquidity and profitability into favourable ones. Also, it strengthened the relationship between credit cards, branches, and banks’ financial performance. ATMs showed no impact on liquidity and dividends, while CAR did not impact the relationship between credit cards, branches, and banks’ financial performance. Research limitations/implications This study informs policymakers on the critical role that banking regulatory compliance—more specifically, the capital adequacy ratio (CAR), which serves as a safety net for banks—and the expansion of FinTech practices play in improving a bank’s sustainable financial performance. This study recommends the development of additional strategies and facilities to achieve FinTech. Originality/Value This study contributes to the current literature by emphasising the impact of CAR on the relationship between financial technology and financial performance in the Egyptian banking sector. The study demonstrates that the relationship between variables may have positive effects on the challenges faced by the banking sector in the wake of the critical events that have affected the Egyptian economy, particularly emphasising the importance of capital adequacy in the relationship between fintech and financial performance. This enables banks to invest in and increase their use of financial technology without risking financial stability, hence ensuring overall financial performance.