Abstract
This paper investigates how fintech innovations and financial inclusion shape bank liquidity risk. For advanced economies, the European Union, United States, Japan, and Australia, the analysis relies on comparative review of supervisory publications and representative bank disclosures from 2018 to 2025. This qualitative assessment highlights the supervisory concern that shifts in deposit composition, funding volatility. The diffusion of artificial intelligence and machine learning analytics can recalibrate both the Liquidity Coverage Ratio and intraday liquidity needs. This article complements a regression analysis. It presents empirical evidence from a harmonized panel of African and South American countries covering years 2017, 2021, 2022, and 2024. Fintech penetration and liquidity risk are proxied by the share of adults making a digital payment, and the ratio of liquid assets to total assets respectively. Descriptive statistics and correlations reveal a modest positive association in Africa and no discernible relationship in South America. Panel regressions with year fixed effects confirm this divergence: digital payment adoption is weakly positively associated with higher liquidity buffers in Africa, while the relationship in South America remains flat. Robustness checks-including winsorized estimation, median regression, and leave-one-out analyses-show that these findings are stable and not driven by outliers or individual country effects. The results underscore the heterogeneous impact of fintech adoption on bank liquidity risk. In emerging regions, digital financial inclusion may play a modest stabilizing role in structurally fragile systems in Africa, while in South America liquidity outcomes appear largely insulated from fintech penetration. The findings highlight the need for region-specific supervisory strategies of fintech effects on liquidity risk.
Keywords: Banks, Financial Inclusion, Fintech Innovations, Liquidity Risk.