Bank health, digital access drive fintech growth in ASEAN-4 countries

On the technology front, digital readiness, measured through internet penetration, infrastructure availability, and firms’ ability to adopt advanced tech, directly and significantly influenced FinTech development. Internet usage and innovation levels enhance technological readiness, which in turn boosts the ability of FinTech firms to deploy, scale, and deliver services efficiently across diverse markets.

A new study has mapped out the intricate web of economic and digital variables shaping the growth of FinTech ecosystems in the ASEAN-4 countries: Indonesia, Malaysia, Thailand, and the Philippines, alongside Vietnam. Published in FinTech under the title “Key Factors Influencing FinTech Development in ASEAN-4 Countries: A Mediation Analysis”, the research identifies financial access, banking conditions, and technological readiness as primary enablers of FinTech expansion, while casting doubt on the direct impact of traditional demographic factors like population size and human development scores.

Through an advanced structural equation modeling (SEM) approach, the authors analyze data spanning a decade (2008–2018) to pinpoint the strongest levers of digital financial transformation in these fast-evolving economies. Their findings offer a fresh lens for policymakers, regulators, and investors targeting sustainable and inclusive digital finance strategies in Southeast Asia.

What drives finTech development in ASEAN-4 countries?

The study identifies three dominant drivers of FinTech development: the health of traditional banks, access to finance, and technological readiness. Among these, general banking conditions were found to have the most substantial direct influence on FinTech growth. Strong, stable banking systems create fertile ground for innovation by nurturing FinTech startups through accelerators, venture capital, and collaborative service models. A well-capitalized banking sector also boosts public trust and financial literacy - two critical pillars for widespread FinTech adoption.

Access to finance also emerged as a central pillar. In economies with stable macroeconomic indicators, such as inflation control and GDP growth, funding becomes more readily accessible, reducing entry barriers for FinTech startups. This access not only supports new ventures but also stimulates financial market development at large. The study found that when banks are financially robust and aligned with national economic stability, they are more willing and capable of channeling resources into FinTech innovation.

On the technology front, digital readiness, measured through internet penetration, infrastructure availability, and firms’ ability to adopt advanced tech, directly and significantly influenced FinTech development. Internet usage and innovation levels enhance technological readiness, which in turn boosts the ability of FinTech firms to deploy, scale, and deliver services efficiently across diverse markets.

Do macroeconomic and innovation factors have a direct impact?

Interestingly, the study concludes that macroeconomic indicators such as GDP and inflation, while critical to the broader financial environment, do not directly lead to FinTech growth. Instead, their impact is channeled through mediating factors, most notably access to finance. Similarly, while higher innovation levels and widespread internet use foster technological capacity, they do not independently drive FinTech expansion without being filtered through the nation’s readiness to implement and scale such technologies.

This mediation insight is pivotal. It highlights that countries with strong macroeconomic stability or high innovation capacity may still lag in FinTech development if they lack robust financial systems or digital infrastructure. For instance, the study found that while innovation is essential, its effect is significantly amplified when coupled with high technology readiness.

In addition, the total population, a variable often assumed to be positively correlated with FinTech opportunity, showed no direct impact. The assumption that larger populations equate to higher digital finance adoption was proven overly simplistic. Without financial accessibility and digital readiness, even the most populous nations may underperform in FinTech scaling. Likewise, the human development index (HDI), though indicative of a country's education, health, and income levels, did not significantly predict FinTech growth, suggesting that structural and institutional enablers are more decisive.

What policies can accelerate FinTech in developing economies?

The research provides a clear policy roadmap for emerging economies aiming to accelerate FinTech adoption. First, governments must prioritize investment in digital infrastructure, particularly in underserved and rural regions. Reliable internet access, advanced ICT facilities, and secure digital networks are prerequisites for technological readiness - a key enabler of FinTech expansion.

Second, improving financial access is non-negotiable. By reducing bureaucratic lending obstacles, supporting mobile-based financial services, and incentivizing FinTech funding through regulatory support, governments can help bridge the capital gap for startups. Expanding financial services to previously unbanked or underbanked populations can further deepen FinTech penetration while promoting economic inclusion.

Third, the study advocates for fostering synergies between banks and FinTech firms. Regulatory sandboxes, co-innovation hubs, and shared infrastructure platforms can reduce friction between traditional and digital financial entities. Encouragingly, the most successful ecosystems observed in the study involved collaborative, not competitive, relationships between banks and FinTech companies.

Lastly, although demographic and human development variables did not show strong direct effects, they should not be ignored. A digitally literate, health-secure population provides long-term advantages for digital finance adoption, especially when supported by inclusive education and public awareness programs.