Does FinTech credit enhance or disrupt financial stability?

The emergence of FinTech credit has attracted the attention of policymakers and academia regarding its implication for overall financial stability. Existing literature and policy debates provide mixed views. Using a sample of 673 observations of an unbalanced panel dataset from twenty-five (25) economies over the period 2005Q1 to 2019Q4, we investigate whether FinTech credit disrupts or enhances financial stability. The results reveal evidence of a non-linear (inverted U-shaped) relationship, suggesting that FinTech credit may enhance financial stability to a certain level, after which a further increase in FinTech credit may disrupt financial stability. These findings underscore important policy implications, particularly the need for close monitoring of FinTech credit growth relative to total credit and to enhance the regulatory framework and broaden its regulatory perimeter beyond traditional banking.