The Threshold Effect of Fintech on Financial Development in Iran

During recent decades, technological progress has led to the considerable growth and development of fintech in Iran. Since fintech affects the financial system, examining the impact of fintech on financial development is of particular importance. Accordingly, the current research aims to investigate the effect of fintech on financial development in Iran. To analyze the relationship between variables the thresholds regression approach and seasonal data for the period 2013-2022 were used. The results show that fintech leaves a positive and significant impact on financial development before and after the threshold level. However, after crossing the threshold level, such an impact will surge. Fintech causes a reduction in transaction costs through the use of technologies such as artificial intelligence, information transparency rising, and efficient access to financial services. Diminishing the financial cost and raising the information transparency increases financial sector efficiency by growing participation in the financial markets. Also, more rise in fintech, through increasing competition in financial markets, promotes innovation in providing financial products and services, the efficient allocation of resources, and the rise of the financial sector efficiency, which in turn leads to more expansion of financial development.