Financial Market Dynamics in the FinTech Era: A Statistical Physics-Inspired Business Analysis of Risk, Volatility, and Stability

Abstract

The rapid expansion of financial technology (FinTech) has significantly transformed the structure and functioning of modern financial markets. While digital financial innovations enhance efficiency, accessibility, and financial inclusion, they also increase market complexity and interconnectedness, which may influence volatility dynamics and financial market stability. Drawing on perspectives from statistical physics and financial market analysis, this study examines the relationships among FinTech market complexity, market interconnectedness, perceived market volatility, and financial market stability. A quantitative research design was employed, and primary data were collected from 256 financial professionals working in banking institutions and FinTech related organizations in Bangladesh through a structured questionnaire. The collected data were analyzed using descriptive statistics, correlation analysis, multiple regression, and mediation analysis using SPSS. The findings reveal that FinTech market complexity and market interconnectedness significantly increase perceived market volatility, while perceived market volatility negatively influences financial market stability. The mediation analysis further confirms that perceived market volatility plays a significant mediating role between digital market dynamics and financial market stability. The study provides important insights into the evolving dynamics of FinTech driven financial systems and their implications for maintaining financial market stability.