Fintech Adoption and Bank Profitability: Market-Conditional Evidence from Egypt and Jordan

Abstract

There is mixed evidence as to whether digital channels boost bank profitability, which is typically explained by the different ways of measuring them. This study examines if the return is instead dependent on the phase of market expansion in which these channels are used.  An unbalanced panel of 30 commercial banks in Egypt and Jordan over 2013–2024 (333 bank-year observations) is estimated with bank fixed effects and Driscoll–Kraay standard errors. Adoption is measured by a three-channel FinTech Index validated by principal component analysis, and the cross-market difference is tested through an interaction term rather than inferred from subsample coefficients. The study found in the pooled panel the index carries no significant association with return on assets. the slope is 0.815 percentage points higher in Egypt than in Jordan (p < 0.001), the unrestricted Egyptian estimate being 0.448 (p < 0.01) against a Jordanian estimate that is negative but not significant. The divergence survives year fixed effects, winsorisation, sub-period estimation and bank-clustered inference, and is absent for the loan-to-deposit ratio. The study concluded that digital channels should be evaluated in light of the growth of the target market; when the customer base is already served, adoption is a cost to maintain competitive parity, not an investment in growth. Therefore, the difference between markets in the tendency for fintech performance is estimated as a testable metric, and the risks of variation are documented, as the variation between countries can appear as a moderating factor at the firm level.