Central Bank Regulatory Policy, FinTech Entrepreneurship, and Digital Financial Innovation in an Emerging Economy: Evidence from Jordan

Abstract

This study examines whether central bank regulatory policy is associated with digital financial innovation in an emerging economy and whether FinTech entrepreneurship transmits part of this relationship. Drawing on institutional and innovation-ecosystem perspectives, the study analyzes an anonymized cross-sectional survey matrix containing 159 valid responses from the Jordanian banking-FinTech context. Regulatory policy is represented by regulatory enablement, infrastructure and ecosystem facilitation, and incentives and capacity building; digital financial innovation is represented by product, process and technology, and business model and market innovation. Reliability, convergent validity, HTMT-based discriminant validity, common method diagnostics, standardized path analysis, and bootstrap mediation testing were applied. Regulatory policy has a positive total association with digital financial innovation (beta = 0.666, p < .001), is positively associated with FinTech entrepreneurship (beta = 0.387, p < .001), and retains a positive direct association with digital financial innovation after FinTech entrepreneurship is included (beta = 0.499, p < .001). FinTech entrepreneurship is also positively associated with digital financial innovation (beta = 0.431, p < .001). The indirect effect is significant (beta = 0.167, 95% bootstrap CI [0.093, 0.242]), indicating partial mediation. The findings show that central bank policy may support digital financial innovation through both direct institutional mechanisms and an indirect entrepreneurial pathway. The study extends institution-enabled innovation research with evidence from Jordan and offers implications for regulators, banks, and FinTech ventures in emerging financial ecosystems.