How Does Fintech Affect the Development of the Digital Economy? Evidence from India

Fintech, or financial technology, significantly enhances India’s financial sector on a global scale. As a substantial driver of the nation’s sustained economic growth, the digital economy has rapidly taken shape. This study employs the CRITIC technique to rigorously analyze fintech and digital economy indicators across India’s 28 states from 2010 to 2022. Through this analysis, the research elucidates the complex relationships and interdependencies between fintech and the digital economy. The findings indicate that fintech plays a critical role in shaping India’s digital landscape, facilitating technological innovation, and reducing financial decentralization at the local government level. Furthermore, the study reveals a compelling phenomenon wherein regional financial regulatory resources act as a positive moderator in enhancing the impact of fintech on the digital economy. Specifically, greater availability of regulatory resources amplifies fintech’s contributions, with this moderating effect being most pronounced in more developed financial hubs. By integrating theories of innovation diffusion, financial inclusion, technology acceptance, and economic growth into a comprehensive theoretical framework, this research provides valuable insights into the transformative potential of fintech in India’s digital economy. While this analysis enriches the existing literature on fintech and digital economic growth, we acknowledge certain limitations, including potential biases in data collection and the exclusive focus on the Indian context. Future research should aim to investigate broader implications across diverse socio-economic landscapes to further enhance our understanding of fintech’s role in promoting economic growth, advancing financial inclusion, and shaping regulatory dynamics.