The Impact of Financial Technology (Fintech) on Financial Performance under the Moderating role of capital adequacy requirements in Egyptian Banks

Purpose This research aims to determine the moderating effect of the (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 analyzed using a fixed-effects approach. Finding: The study found a positive impact of FinTech on financial performance of Egyptian banks. While the control variables (Bank size, inflation) had no significant impact on financial performance. This is due to fintech's role in improving operational efficiency, which reduces dependency on external factors such as rising production costs and monetary policy changes. It also indicates banks' ability to respond to inflationary environments by adjusting interest rates or improving risk management. Study demonstrates that the GDP growth has a significant positive impact on the financial performance of banks, as Fintech enhances bank efficiency and promotes financial inclusion, contributing to improved banking sector performance and expanded access to financial services for a broader segments of society. Additionally, CAR mitigates the relationship between cost of software automation and liquidity, dividends, as well as the relationship between ATMs and liquidity, and dividends. Nevertheless, capital adequacy requirements not affect the relationship between credit cards, branches and financial performance indicators. Research limitations/implications: This study provides policymakers insights into 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 encourages the development of additional strategies and facilities to achieve FinTech. Originality/Value: This study contributes to the current literature by emphasizing 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 emphasizing 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.