Difference-in-Differences Estimation of Open Banking Policy Reforms on FinTech Market Structure and Digital Economic Output

This study investigates the causal impact of Open Banking policy reforms on FinTech market structure and digital economic performance across 40 countries over a 12- year period using a multi-period Difference-in-Differences (DiD) framework. Leveraging staggered policy adoption and a newly constructed Policy Intensity Index, the analysis integrates 1,200 country-year observations, 6 major macro-financial databases, and 14 regulatory sources. The findings demonstrate that Open Banking reforms significantly increase digital economic output by 8.4% to 12.1% on average, depending on model specification and regulatory depth. Event-study estimates further reveal that treatment effects become statistically significant beginning one year after implementation, growing steadily through year +4, with cumulative effect sizes reaching 0.22–0.25 standard deviations, indicating progressive and compounding economic gains rather than short-term fluctuations. The study also uncovers substantial structural shifts in FinTech market concentration. In treated countries, the Herfindahl–Hirschman Index (HHI) declines from 0.245 (pre-reform) to 0.190 (postreform), while control countries exhibit no meaningful change (stable around 0.230), suggesting that intensified competition is driven directly by Open Banking regulations. Heterogeneity results indicate that policy intensity is a critical determinant of effectiveness: low-intensity frameworks yield only modest improvements (β = 0.031), medium-intensity reforms show moderate gains (β = 0.087), and high-intensity regimes generate the strongest impacts (β = 0.142), confirming that deeper regulatory designs amplify market and economic outcomes. These findings offer important insights for policymakers seeking to optimize regulatory design, harmonize API standards, and promote innovation-driven financial inclusion.