Politologija ISSN 1392-1681 eISSN 2424-6034

2026/2, vol. 122, pp. 8–43 DOI: https://doi.org/10.15388/Polit.2026.122.1

The Political Economy of Fintech: Review of Literature and Proposal of Research Agenda

Vytautas Kuokštis
Riga Technical University, Riga Business School, Baltic Finance Center;
Vilnius University, Institute of International Relations and Political Science
E-mail: vytautas.kuokstis@tspmi.vu.lt

Summary. This article aims to address the political economy of Fintech (Financial Technology). The key assumption guiding the paper is that the regulation, supervision, and ultimately the degree and shape of development of the Fintech sector are affected by and, at a fundamental level, even determined by political factors. While politics can influence Fintech via both demand and supply channels, this article primarily focuses on the supply side. The article reviews the emerging academic literature aiming to analyze the politics and political economy of Fintech, showing that there is still a significant gap. Drawing inspiration from the earlier literature on the political economy of traditional finance, but also taking into account certain specificities of Fintech, the article suggests how the research agenda for the political economy of Fintech should proceed, addressing the potential influence of economic interests, institutions, and ideas.
Keywords: Fintech; political economy; financial regulation; international diffusion; central banks; regulatory policy.

Finansų technologijų politinė ekonomija: literatūros apžvalga ir pasiūlymai dėl tyrimo darbotvarkės

Santrauka. Straipsnis apžvelgia politinės ekonomijos įžvalgas apie finansų technologijas (fintech) ir formuluoja tyrimų darbotvarkę, remdamasis „interesų, institucijų ir idėjų“ triada. Atskleidžiama, kad politiniai fintech reguliavimo ir plėtros veiksniai iki šiol tirti fragmentiškai; siūlomas preliminarus hipotezių rinkinys apie finansinių skandalų poveikį reguliaciniam griežtumui, priežiūros institucijų architektūros (integruoto vs. fragmentuoto modelio) reikšmę, dviprasmišką centrinių bankų nepriklausomybės ir partinės ideologijos įtaką bei įsitvirtinusių suinteresuotų šalių elgsenos įvairovę – nuo pasipriešinimo iki bendradarbiavimo su startuoliais. Taip pat pabrėžiama galima tarptautinės difuzijos (mokymosi, emuliacijos, konkurencijos ir prievartos) svarba. Straipsnyje siūloma plėsti empirinės analizės lauką, tam atlikti didelių imčių ir kokybinius tyrimus, atsižvelgiant į priežastinį heterogeniškumą tarp šalių ir skirtingų fintech segmentų (pvz., kripto-, mokėjimai, skolinimas). Straipsnyje raginama remtis tradicinėmis politinės ekonomijos teorijomis, tačiau kartu pritaikyti jas pagal fintech lauko specifiką, derinant politinės inovacijų ekonomijos ir technologijų reguliavimo įžvalgas, taip pat atsižvelgiant į didelį naujųjų finansinių technologijų neapibrėžtumą bei spartų kitimą.
Reikšminiai žodžiai: fintech, politinė ekonomija, finansinis reguliavimas, tarptautinė difuzija, centriniai bankai, reguliacinė politika.

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Received: 26/08/2025. Accepted: 31/03/2026
Copyright © 2026 Vytautas Kuokštis. Published by Vilnius University Press. This is an Open Access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.

Introduction

Fintech is one of the most important, if not the most important, recent trends in finance. Fintech has been expanding rapidly, and holds considerable potential to disrupt and restructure financial markets, bringing benefits in terms of efficiency, innovation, and inclusion, but also posing risks for financial stability, consumer protection, and inequality. Fintech raises important challenges for policymakers, not least due to its fast-changing nature and technological complexity. According to some, Fintech is even capable of transforming “the fundamental political arrangement underlying the operation of the modern financial system”1. Fintech can be a powerful disruptive force because it has the potential to disintermediate traditional financial institutions and provision of financial services, presents important challenges to regulatory and supervisory frameworks, and may result in significant reallocation of resources and changes in power relations within the financial system; all these are inextricably linked to questions of political contestation and political choices.

Not surprisingly, research on Fintech has grown rapidly. Economists, lawyers and economic (financial) geographers have been contributing to a growing body of literature on the normative aspects of the best way to regulate and supervise Fintech, Fintech’s effects on financial markets, growth, and (in)stability, as well as the economic and technological drivers of the sector’s development. However, contributions from political scientists and political economists have been largely missing from this conversation, specifically on the positivist question of how political factors affect Fintech regulation, supervision and, ultimately, Fintech development. This is an important omission in scholarship (with several notable exceptions). My argument is that politics has an important influence on Fintech development in terms of both demand and supply. In this article, I focus on the supply aspects of this phenomenon, exploring how political factors may affect regulatory and supervisory decisions that can, in turn, significantly influence the development of the Fintech sector.

This article aims to review the current literature on the political economy of Fintech and discuss potential avenues for future research. To this end, I start with an overview of the political economy approaches to finance in general, by focusing on the role of interests, institutions, and ideas. I then turn to the literature review of the political economy of Fintech, and subsequently discuss how future scholarship should proceed.

1. “The inescapable politics of money”2

There is a very large body of literature addressing how political factors affect regulatory and supervisory decisions related to finance, and, ultimately, the growth (or lack thereof) of the financial sector, be it in the banking sector or capital markets. The core insight is the realization that one cannot fully understand financial regulation and financial development without taking into account the political dimension(s)3. When analyzing monetary matters, politics is ‘inescapable’4. According to Kirshner, “The management of money is always and everywhere political: for every policy choice, there is an alternative that some actors would prefer”5.

This is for two fundamental reasons. First, economics often does not provide a clear answer as to the best policy, although it does describe real constraints facing decision-makers (in terms of tradeoffs, limitations, and costs involved). To give one example, financial market liberalization entails both costs and benefits – while lower regulation can allow for more efficient capital allocation, it also may increase risks of financial instability and volatile capital flows. Second, even if there is a clear policy solution in terms of aggregate economic efficiency, ultimately that decision will only get adopted if it is politically feasible. For instance, allowing better access to banking and other financial instruments is often considered a key prerequisite to encourage economic growth, but it may not be adopted if it goes against the interest of powerful political actors or violates other important political constraints. In terms of Fintech, the implication is that policy decisions, including the adoption (or lack thereof) of Fintech sandboxes, innovation hubs, and other regulatory tools, as well as the degree of permissiveness regarding different types of Fintech activities (crypto, capital raising, consumer lending etc.), are at their core political decisions influenced by competing interests and institutional constraints.

One way to structure the discussion on the politics of money and finance is to divide the factors according to the classical triumvirate of interests, institutions, and ideas6. The interest-based perspective poses the question ‘Cui bono’, by asking “In whose benefit would it be for outcome X to pertain over outcome Y?”7 A very influential strand in scholarship, often associated with – but not limited to – the rational choice (public choice) approach, has explained financial regulation and development by analyzing how interest groups in the society benefit or lose from certain financial changes8, and thus traced financial policy decisions and regulations to the politically powerful interests that support them. An important broader insight is that the aggregate economic effects can be ambiguous compared to the sometimes much clearer distributive effects (one good example of this is the exchange rate policy9).

A classical study by Rajan and Zingales explains the changes in financial development in the 20th century by analyzing the incumbents’ interests, and, specifically, their opposition to competition10. Another influential study by Benmelech and Moskowitz11 has looked into the usury laws in 19th century US and found that these “laws coincide with other economic and political policies favoring wealthy political incumbents, particularly when they have more voting power”. Of particular note is the research agenda on regulatory capture – “the process through which special interests affect state intervention in any of its forms”12. The research agenda emphasizing the importance of economic interests in explaining financial regulation and development has thus, to a more or less implicit degree, carried a largely negative normative connotation. The stress has often been on the mostly detrimental power of incumbents in erecting various barriers to limit competition, thus putting limits on the expansion of financial services, and hence financial development. For Fintech, the interest-based perspective suggests that the phenomenon can pit incumbent financial institutions versus Fintech newcomers, with the political fight being over a more conservative, restrictive approach versus a more permissive, proactive one embracing or even encouraging new financial models.

In a related but distinct line of research emphasizing the role of interests, scholars have examined the role of partisanship. The key idea is that political parties represent constituents with different underlying economic interests, and thus should mold public policies in accordance with those preferences once in power. Empirically, results concerning the financial realm have been mixed. Some studies find that right-wing parties are more likely to deregulate and encourage financial development13. On the other hand, Pinto14, somewhat counterintuitively, found that left-wing governments are more likely to lead to more developed equity markets. In the Fintech realm, the partisan dimension may be particularly intriguing, given that Fintech can simultaneously be framed as a market-friendly innovation phenomenon aligning more with right-wing and liberal parties, but also as potentially increasing financial inclusion, which should be preferred by left-wing parties.

The second broad set of factors has been institutional. According to Blyth15, “institutional explanations focus our attention on how economies are organized and how such configurations impact agents’ interests. Seen in this way, institutions link larger economic structural changes and interests but become causally important in their own right.” Institutions can be defined as “rules of the game” in a society, and thus are open to multiple interpretations, ranging from broadest concepts encompassing culture and norms to more formal and legalistic definitions having to do with specific electoral and other governance rules.

An influential body of literature links financial development with ‘broad’ institutions16. The ‘legal origins’ theory states that financial development is favorably affected by the British (common law) tradition17. It has been additionally argued for the importance of ‘property rights institutions’ that constrain the elites, reduce risk and transactions costs, and thus foster financial development18. Finally, researchers have argued that social trust (social capital) is conducive to the development of the financial sector, especially in settings where “legal enforcement is weaker and among less educated people”19.

One important institutional dimension has been the political regime type, usually conceptualized as the effect of democracy versus autocracy. Theoretically, the most commonly held view has been that democracies should lead to more financial development due to both supply and demand factors, as democracies have a larger selectorate with the public at large being interested in access to financial markets, while elected politicians face stronger incentives to deliver on the promises to expand said access20. The empirical findings have been less robust, with some studies finding null results21, and others arguing that the effect is contextual and depends on the type of democratic regime22. Furthermore, the national institutional setup has been argued to be important – for instance, financial policies in countries with more veto players tend to be more stable, with fewer and slower policy changes23. Finally, central bank independence has been shown to affect financial supervision as well24. The institutional perspective is arguably particularly relevant in the case of Fintech, given the significance of regulatory set-up, such as whether the financial supervision in a country adopts an integrated or fragmented model, with supervision shared across several agencies.

To finish the triad of factors, scholarship has argued that ideas can be important drivers of financial policy as well. In fact, given the often-high degree of complexity of financial markets, their technical nature, and the repeated occurrence of large crises, one could make the case that an ideational perspective might be particularly fruitful in this realm. The ideational effects could be conceptualized in various ways, ranging from policy paradigms25, to beliefs about causal relationships, normative frameworks (i.e., what goals should be pursued), framing and even as political weapons or as governance technologies26.

Of particular note has been research emphasizing global interdependence, which goes beyond national country-level comparative analysis. This research has explored important mechanisms of global diffusion behind financial regulatory decisions highlighting the importance of learning, emulation, and competition – with its key idea being that policymaking is interdependent among countries27. Finally, scholars have emphasized the importance of economic and financial crises, including financial scandals, in affecting the evolution of financial regulation28. The experience with large crises can be interpreted as an impetus for policy learning, usually leading to more cautious, restrictive policy stances. For Fintech, with its global nature and highly dynamic development as well as regulatory uncertainty and dynamics, these diffusion mechanisms, and, in particular, learning and emulation, may be especially pertinent.

2. Literature on the Politics (Political Economy) of Fintech

In contrast to the vast literature on the politics of finance in general, there is surprisingly little work on the politics of Fintech. As Knight and Wojcik state, “despite a Fintech fever in business and media, research on Fintech is still niche, particularly in social sciences”29.

The bulk of literature addressing Fintech development and regulation has come from economics, finance, and law. According to Stolbov and Shchepeleva, “Fintech-related research naturally appears one of the fastest emerging research programs in finance”30. Economic geographers have also explored the variegated nature of Fintech spread31. Nevertheless, it has received limited attention from political scientists and political economists. Most analyses have posed the normative questions of how Fintech should be regulated, and whether Fintech development has positive or negative effects on important financial and macroeconomic variables. To the extent that scholars have looked into the determinants of Fintech regulation and Fintech development, they have largely scrutinized economic and technological factors.

There exists a sizable and growing literature on the economic and technological factors driving the development of Fintech. When trying to explain the divergence in Fintech development across time and countries, scholars have looked into the role of overall economic development, venture capital availability, technological sophistication (internet and mobile phone penetration), labor force characteristics, banking system concentration and mark-ups, trust in the financial system, development of bond and equity markets, inflation rates, quality of research and university systems, innovation capacity, the extent of globalization, shadow economy, financial literacy, and the country size32.

A number of studies address the influence of regulations on Fintech development. Claessens et al. look at banking sector regulation stringency33. Similarly, Cornelli et al. find that less stringent banking sector regulation is associated with higher Fintech lending34. Ciukaj and Folwarski created an index of Fintech regulation based on the World Bank’s Fintech database (2021) and showed that, in the European Union, the more regulated the sector is, the more developed it is35. In support of this view, Rau argues that there is a causal positive relationship between explicit legal regulation and crowdfunding volume36. Moreover, Fung et al. analyze in a causal framework how the adoption of Fintech sandboxes has affected financial stability and find the effects to be heterogeneous and context-dependent37. Finally, Buckley et al.38 investigate the actual regulatory construction of Fintech sandboxes and innovation hubs across the world, presenting a rather skeptical view on sandboxes and arguing that innovation hubs are usually superior instruments.

There are considerably fewer studies that examine what could be described as political factors influencing Fintech regulation and development. Several investigations use indicators of institutional landscape and its quality to analyze their associations with the level of Fintech development. Namely, a few large-N studies have looked into the potential role of the rule of law, institutional quality (government effectiveness, control of corruption, etc.), efficiency of the judicial system, doing business rankings, economic freedom, political stability, legal origins (Anglo-Saxon vs. French and German)39. A study by An et al.40 finds that “private property rights protection, contract enforcement and information sharing infrastructures are all significantly, positively associated with the amount of capital raised through ICO” (initial coin offerings).

There are some exceptions, however, that aimed to look at a broader set of potential political determinants beyond indices of institutional quality, government efficiency, political stability, and trust. Most of the analyses in this vein have been qualitative case studies. Several qualitative studies were conducted analyzing the political economy of Fintech in the Baltic States. The Baltic countries present a fruitful object of study for the evolution of Fintech regulation and development. Although these countries are similar in many important background conditions, and thus present a good set of cases for the most-similar case design, their approaches have diverged significantly, both across countries and over time. Estonia was initially very active in promoting crypto sector development. The crypto sector expanded very fast but led to numerous compliance issues and overwhelmed the regulators, leading to a U-turn in regulation, from a lax and proactive approach to a crackdown41. Subsequently, Estonia was rather cautious in terms of Fintech promotion. By contrast, starting in 2016, Lithuania took deliberate and active steps in promoting Fintech, leading to rapid growth of the sector, especially regarding payments companies. After 2020, however, Lithuania also adopted a more cautious approach. Finally, Latvia was initially rather conservative, but started being more active after 2020, most notably, by adopting a national Fintech strategy in 2023, and updating it in 2025, as well as establishing the regulatory sandbox in 2021. Raudla et al.42 analyze these differences and highlight the role of institutions and policy learning. They note that the integrated financial regulation approach (with the central bank being responsible for supervision) in Lithuania was more conducive to a more proactive approach, while the fragmented model in Estonia and Latvia (in the latter case, until 2021) was related to a more cautious policy stance. Furthermore, policy learning, and, specifically, the legacy of financial scandals in Estonia and Latvia acted as a force against active promotion of Fintech initially, while, in Lithuania’s case, several Fintech-related scandals contributed to the toughening stance.

In another article, Raudla et al.43 tackle the establishment of regulatory sandboxes in the Baltic States – a specific experimental policy tool aimed at testing new Fintech models. The Baltic countries diverged on this – Lithuania created the Fintech regulatory sandbox as early as 2018, followed by Latvia in 2021, while Estonia eventually opted not to pursue this regulatory tool, although initially joint work was being carried out together with EBRD planning a Fintech sandbox44. The article argues that this divergence can be explained by the influence of key decision-makers (policy entrepreneurs), as well as the perception of existing legal and financial constraints facing financial regulators.

Investigating Fintech regulation in the UK and Germany, Hodson analyzes the political dynamics of regulation of the new Fintech banks, and, in particular, how they “challenged incumbents without breaking or remaking regulation” 45. Furthermore, Tsang and Chen46 and Tsai et al.47 show how the processes of diffusion (learning and emulation) shaped the adoption of the sandbox in Taiwan. Using the two-level game theory, Lee and Seo explore the role of interest groups in South Korea in adopting the Fintech regulatory sandbox48. In another qualitative study, Langley and Leyshon compare Fintech regulation in the UK and China. They dub the UK’s approach as “regulating with/by platforms”, “where start-up and early-career platforms are enrolled into an innovation-friendly financial regulation regime that promotes consumption and competition balanced with stability” 49. By contrast, China’s stance is conceptualized by these authors as “regulating against/of platforms”. Besides, Hendrikse et al.50 “analyse how Belgian entrepreneurs and politicians assess Brussels’ locational resources, and strategically couple big financial institutions with small tech startups in order to cultivate a Fintech ecosystem in the service of incumbent finance, constituting a Fin-Tech-State triangle” (p. 1516–1517). Gruin and Knaack51 “find that the growth of both shadow banking and fintech can be located in the same trajectory of reform and development that has animated Chinese financial policy since the early 1990s” (p. 370). Moreover, Wang looks into the case of China and shows how the regulatory stance shifted “from being very supportive in the early years (2012–2014) to being very controlling between 2015 and 2018”52 as a result of the Party’s aim to politically control the financial sector and to limit the risk of fraud. Finally, Liu53 “demonstrates that Alibaba, Ant Group, and Tencent can be seen as a form of CCP financial statecraft to help achieve its foreign policy goals because they are established ‘fintech platforms’”.

Regarding quantitative large-N studies, one could single out the article by Ba and Sen54. They analyze the regulatory responses to cryptocurrencies. Their argument, backed by cross-sectional regression analysis, is that these regulatory responses are related to governments’ willingness to maintain monetary sovereignty. Specifically, they find that countries that have fixed exchange rate regimes and impose capital controls are more likely to ban cryptocurrencies. Furthermore, autocracies are more likely to ban cryptocurrencies than democracies, as democracies have more veto-players and have a stronger rule of law.

3. Setting the Research Agenda: Theoretical Discussion and Expectations

The previous section has shown that there is still a significant gap in literature regarding the political (economy) determinants of Fintech regulation and development. Therefore, there is a lot of potential in exploring these issues. A logical place to start would be to develop a theoretical apparatus generating guiding hypotheses.

In turn, the natural way of proceeding would be to build on the politics of finance literature covered earlier in this article, although being cognizant that certain modifications might need to be introduced, potentially bringing in insights from other theoretical bodies of literature. Why might such modifications be necessary? First, by definition, Fintech involves a combination of finance and technology. Thus, insights from the literature on the political economy of technology and innovation may prove valuable, particularly regarding how states promote technological development, and how regulatory frameworks adapt to technological change 55. Second, Fintech is a very rapidly evolving area, thus introducing a high level of uncertainty, which can have important implications for how the preferences of traditional financial institutions (economic interests) and policymakers are formed. Some empirical observations already suggest that the currently existing theoretical models of finance may need to be adjusted – for instance, conventional wisdom would lead to the expectation that incumbents aim to oppose competition and new business models, but it seems that the reaction of traditional financial institutions, such as the large banks, to Fintech development is variegated both across countries and over time56, with some traditional players choosing to cooperate with Fintech start-ups rather than lobby to erect barriers against them.

Starting with perhaps the strongest theoretical prior, one would expect that the experience with financial scandals – particularly those related to Fintech and money laundering – will induce countries to adopt a more restrictive approach towards Fintech regulation, and hence, via this mechanism, be linked with a less developed Fintech sector. The comparative studies of the Baltic countries57 revealed that the experience (or lack thereof) with financial scandals and the associated policy learning led to substantial variation in regulation (and hence Fintech development) across the Baltic countries and over time. Second, the institutional setup of regulation played a role – an integrated model of financial supervision in Lithuania was more conducive to enabling Fintech regulation and proactive stance compared to the fragmented model in Estonia, where the supervisor of the financial system is separate from the central bank. Therefore, another hypothesis is that the institutional setup of financial regulation will have an effect on Fintech regulation and development – in particular, the integrated model being associated with more enabling regulation and faster Fintech development.

The independence of the central bank is another potentially important variable, although the exact mechanisms and even the direction of its influence are theoretically ambiguous. On the one hand, independent central banks tend to be rather conservative, and are more able to resist potential pressure by politicians to facilitate financial innovation and experimentation. On the other hand, independent central banks have more room for maneuver, and can take the initiative to act as policy innovators, enabling the emergence of new financial models, especially if they perceive the existing financial system as deficient in terms of the price and quality of services provided, as was the case in Lithuania in 2016–202058. The Bank of Lithuania, which represents a case of a highly integrated and independent supervisor, was actively promoting Fintech development in this period.

The role of partisanship is theoretically ambiguous and intriguing, even more so than in the realm of traditional finance, given that Fintech is multi-dimensional and can be framed in very different ways59. The basic expectation would be that right-wing and liberal parties would be likely to enact Fintech-enabling regulation, as they tend to support new business models and economic expansion, while emphasizing the higher competition that Fintech brings. Furthermore, Fintech is sometimes framed as perpetuating inequalities and increasing the already high level of financialization, which might further strengthen left-wing opposition to the sector. However, one could also conceive of Fintech as a challenge to the existing financial order and entrenched incumbent power, potentially leading to fuller ‘democratization’ of finance and reducing inequalities, thus increasing the leftist parties’ support for the sector’s development.

As mentioned above, another basic expectation would be that incumbent economic interests – traditional banks – would be opposed to the emergence of new companies that can create competitive pressures, and thus one would hypothesize that countries with more powerful incumbent financial lobbies would have less enabling Fintech regulation and less Fintech development. Nevertheless, the multi-faceted and fast-changing nature of Fintech may complicate the formulation of strong preferences on the part of incumbents. Furthermore, we know that some traditional institutions choose to cooperate with Fintech start-ups, integrate with them, or adopt Fintech technologies themselves. An intriguing question thus is what factors determine this opposing-versus-welcoming stance of the incumbents. One possibility is that this stance is contingent upon other important factors – for instance, a strong and independent central bank impervious to incumbents’ lobbying may send a clear message about the will to support the transformation of the financial system, prompting the incumbents to embrace the new opportunities rather than fight a losing battle. Second, Fintech does not always challenge the core business models of the traditional financial institutions and may specialize in more niche segments of the market – one could hypothesize that traditional financial interests will only strongly oppose Fintech expansion when they see it as a major threat challenging the incumbents’ core business models, for instance, when Fintech companies start entering the mortgage lending market. Finally, the traditional banks may face different degrees of difficulty in replacing or updating their IT systems to embrace Fintech60, and thus, accordingly, have different preferences regarding the sector’s development.

Furthermore, even if the incumbents are opposed to enabling Fintech regulation and development, they do not always win the political battle. First, promoting Fintech, especially when framed as an inclusive and democratizing force, can draw the political fight out of the ‘quiet politics’61 into highly salient public debates, hampering the lobbying power of incumbents. Second, the incumbent interests may simply lack conducive avenues for lobbying, especially if Fintech is promoted by determined politicians and regulatory authorities, or face too strong an opposition – particularly if pro-Fintech regulation is supported by the so-called ‘Big Tech’ players, such as the US-based giant tech companies.

It would also be worthwhile to analyze the diffusion processes across countries when it comes to Fintech regulation. Literature in international political economy and public policy has seen a proliferation of the study of policy interdependence62. The key insight is that policymaking is not made independently across the world but is considerably affected by processes beyond a given country’s borders. Case studies63 suggest that the mechanism of diffusion might be particularly strong when it comes to Fintech regulation given its highly uncertain and evolving nature. Diffusion comes in different forms: learning (adjusting regulation rationally reacting to perceived failures or successes in other jurisdictions), competition (competing for a limited set of resources, such as investment, with others), coercion (powerful foreign actors forcing the adoption of regulation), and emulation (following others’ examples according to the logic of appropriateness)64. So far, case studies have largely focused on learning and emulation. However, one could also investigate all the main mechanisms of diffusion.

Furthermore, in terms of ideational perspective, there is a multitude of ways that Fintech development is framed. For instance, some observers and organizations tend to emphasize the benefits that Fintech can bring in terms of innovation, efficiency, lower costs, and bringing even broader benefits, described as ‘democratizing finance’. This is an example of how the potential benefits of Fintech are described in a Laboure and Deffrennes’ book65:

These technologies have a common goal: they are designed to make financial services more accessible to the public. Today’s fintech revolution enables consumers to transfer funds, raise money for business start-ups, and manage personal finances without the help of an intermediary or professional. Fintech is also improving economic inclusion, providing access to banking and commerce in rural areas, and allowing individuals to receive social security transfers. In summary, modern fintech is democratizing finance.

At the same time, there are also many critical voices, encompassing calls for concern regarding money laundering and an increased financial risk as well as broader financial instability. Some authors describe Fintech as a technology that provides “global finance new forms of ‘profiling’ poor households into generators of financial assets”66, while innovative regulatory solutions such as sandboxes are seen as providing opportunities for riskwashing – a term defined as “a financial regulatory institution’s making products or processes of a company seem to involve less risk for stakeholders by engaging in activities that mimic in a superficial or narrow way genuine attempts to assess and reduce risk”67.

When thinking about the potential drivers of Fintech regulation, supervision, and development, one important issue to keep in mind is causal heterogeneity, and, in particular, that the drivers of Fintech policy and development can be substantially different across geographical contexts. Concretely, one might expect that they would differ between richer and poorer regions. As was put by Langley and Leyshon68, Fintech is often understood as “transforming banking in the global North” and “‘banking ‘the unbanked’ in the global South”69. Another potentially important heterogeneity might be expected to emerge regarding different types of Fintech activities, and in particular between crypto assets versus other types of Fintech. Research suggests that the determinants of the development cryptocurrencies versus peer-to-peer lending are substantially different70. Furthermore, it has also been found that the drivers and effects of digital lending vs. digital capital raising might also be different71.

Table 1 summarizes the preliminary theoretical expectations of how different political variables may affect Fintech, and also provides some illustrative empirical examples showcasing the political forces at play.

Table 1. Expectations on some factors as to their effects on Fintech regulation and development

Note: the table was compiled based on own elaboration.

Conclusions

In this article, I took stock of the growing scholarship on the politics and political economy of Fintech and suggested avenues of how future research should proceed. The article has identified an important gap, namely, that while economists, legal scholars, and economic and financial geographers have extensively analyzed Fintech, political scientists and political economists have so far been largely absent from the conversation, with a few notable exceptions. Furthermore, most research has so far posed the normative question of how Fintech should be regulated rather than a positivist one of why Fintech spreads the way it does across countries and over time.

This article drew on the well-known literature on the politics and political economy of finance, with a classical typology of the ‘three I’s’, i.e., interests, ideas, and institutions. Inspired by this literature, the article then formulated a set of preliminary theoretical expectations of how politics might affect the supply side of Fintech development via regulation and supervision. The main expectations are the following: a) Fintech should pit existing incumbents versus newcomers, although the extent and nature of this competition can be substantially influenced by contextual factors; b) experience with financial, and specifically with Fintech scandals should lead to more restrictive regulation; c) central bank independence and partisanship have an ambiguous theoretical influence, given competing motivations; d) integrated financial supervision models should be more conducive to more proactive/less restrictive Fintech development; e) given the uncertainty and rapidity of Fintech development, global diffusion effects might be particularly important for Fintech.

The article also calls for further theoretical refinement. In particular, the simple expectation that incumbents should oppose Fintech development via regulatory and supervisory choices might need substantial modification, as preliminary empirical evidence suggests that incumbent responses vary significantly. Furthermore, there is likely space for fruitful incorporation of theories on technological regulation and industrial policy that can be used for theoretical advancement of Fintech political economy theories.

Future scholarship would be well advised to pursue both qualitative case studies and large-N quantitative studies, as well as mixed-methods designs. Both of these approaches should take into account important potential heterogeneities and contextual effects (such as different relevant aspects of Fintech in the developed world versus ‘Global South’) as well as potentially important differences across Fintech segments (digital lending, digital capital raising, crypto, etc.).

Acknowledgment

Funded by project No. 5.2.1.1.i.0/1/23/I/CFLA/001 “Knowledge and Research Capacity Strengthening of Anti-Money Laundering, Financial Sector Technology and Analysis.” An earlier version was presented at the ECPR Joint Sessions of Workshops, Prague, May 2025. The author is grateful to the event’s participants for valuable feedback as well as the helpful comments by the anonymous reviewers of Politologija.

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