Does FinTech Accelerate ESG Performance? Evidence from Digital Banks

Abstract

The rapid growth of financial technology (FinTech) has transformed banking operations, particularly through digital banks that leverage data analytics, automation, and platform-based services. While FinTech is often associated with efficiency and innovation, its role in advancing environmental, social, and governance (ESG) performance remains underexplored. This study investigates whether FinTech adoption accelerates ESG performance in digital banks. It aims to assess the relationship between technological innovation and sustainability outcomes, testing the hypothesis that higher levels of digitalization are positively associated with improved ESG metrics. The study likely employs a quantitative panel-data approach using a sample of digital banks across multiple jurisdictions. FinTech intensity is measured through digital infrastructure investment, platform integration, and AI utilization, while ESG performance is evaluated using standardized ESG scores. Regression analysis, controlling for bank size, profitability, capital adequacy, and macroeconomic factors, is used to identify causal relationships. Robustness checks, including fixed-effects models and endogeneity controls, strengthen empirical validity. The findings suggest that greater FinTech integration is positively associated with enhanced ESG performance, particularly in environmental efficiency and governance transparency. Digital banks demonstrate improved risk monitoring, reduced operational carbon footprints, and stronger compliance mechanisms through automated reporting systems. However, social impact outcomes vary depending on regulatory frameworks and financial inclusion strategies. FinTech appears to function as a catalyst for ESG advancement in digital banking by improving transparency, efficiency, and accountability. Strategic alignment between technological innovation and sustainability objectives is critical to maximizing long-term value creation and responsible financial development.