The economic forces driving fintech adoption across countries

BIS Working Papers  |  No 838  | 
04 February 2020


This paper looks at how agents in different economies around the world are adopting financial technology ("fintech"). Fintech services are expanding in payments, credit, wealth management and insurance, in both advanced and emerging market and developing economies. Yet the scale of adoption differs widely. The paper seeks to explain why fintech innovations are more widely adopted in some economies and markets, but not in others.


This paper draws from the nascent literature on fintech in different economies. It presents novel indicators and insights from empirical research on the use of fintech in different areas of financial services. It aims to present the evidence on the drivers of fintech adoption in a widely accessible way.


There is evidence that fintech adoption is higher where (i) there is unmet demand for financial services; (ii) macroeconomic conditions are supportive; (iii) regulation is accommodative; and (iv) demographic forces, such as a young population, are favourable, bolstering trust in new providers. An implication is that, where fintech helps to enhance financial inclusion, this is likely to be positive for economic growth and development. Fintech activity could also increase cross-border competition in financial services over time. Finally, while fintech innovations can sometimes overcome specific market failures (eg by reducing information asymmetries or transaction costs) fintech activities will remain subject to the risks traditionally present in finance, such as liquidity mismatches, speculative bubbles, interconnectedness and, potentially, systemic importance.


Fintech is being adopted across markets worldwide - but not evenly. Why not? This paper reviews the evidence. In some economies, especially in the developing world, adoption is being driven by an unmet demand for financial services. Fintech promises to deliver greater financial inclusion. In other economies, adoption can be related to the high cost of traditional finance, a supportive regulatory environment, and other macroeconomic factors. Finally, demographics play an important role, as younger cohorts are more likely to trust and adopt fintech services. Where fintech helps to make the financial system more inclusive and efficient, this could benefit economic growth. Yet the market failures traditionally present in finance remain relevant, and may manifest themselves in new guises.

JEL codes: E51, G23, O33

Keywords: fintech, digital innovation, financial inclusion, financial regulation