BUILDING A GREEN DIGITAL ECONOMY: HOW FINTECH STRENGTHENS GREEN FINANCE AND FINANCIAL PERFORMANCE

Abstract

The research methodology used in this study was quantitative research design, which aimed at studying the role of fintech in strengthening the financial performance of green finance in the framework of a green digital economy. The study employed panel data of 30 countries in developing and emerging economies from 2015 to 2024, data was drawn from World Bank and IEA, financial and environmental databases. The indicators used to assess the development of fintech were digital financial services, digital payments and the adoption of financial technology, while green finance indicators were green investment, green credit and financial flows oriented towards the environment. Return on assets (ROA) and return on equity (ROE) were used to determine financial performance. The concept of green finance was considered as a potential intervening variable that affects the financial performance of financial institutions. The controlled variables were the economic growth, inflation, foreign direct investment, financial development, and renewable energy consumption. Descriptive statistics and correlation analysis were conducted followed by panel regression analysis to evaluate the direct connection between fintech development and financial performance, while a mediation analysis was used to test whether green finance was a mediator to enhance the direct relationship. The diagnostic tests for multicollinearity, heteroskedasticity, cross sectional dependence and serial correlation were performed and robust standard errors were used as appropriate. The results showed that the relationship between fintech development and financial performance was positive and significant, while green finance played the role of a mediator, but it did not completely mediate the relationship between fintech development and financial performance. Green finance was shown to be a significant and partial mediation variable, and fintech development was significantly and positively associated with green finance. These results were validated in robustness tests based on alternative indicators of financial performance and fintech. These findings highlight that fintech can have an impact on the financial performance, but also through greater access to green finance channels via the allocation of funds to green activities, making green finance a potential meaningful supplement to fintech-related financial development. Policy implications are discussed.