Balancing Fintech Innovation and Financial Stability in Telecom-Led Fintech: Evidence from STC Bank and Paycell

Abstract

The study examines the dilemma of telecom-led fintech companies between innovation and financial health in varying institutional and macroeconomic settings. The study compares two banks, namely STC Bank in Saudi Arabia and Paycell in Turkey, covering the period from 2020 to 2025, and employs a comparative case study approach, utilizing interviews, annual reports, and financial disclosures. The study builds on the foundations of dynamic capability theory and financial resilience, specifically on sensing and seizing capabilities and on financial stability, examining their influence on innovation performance. The results demonstrate that regulatory and economic factors significantly influence fintech strategies. Under Vision 2030, STC Bank has a stable regulatory environment that enables rapid innovation, structured governance, and robust capital-based stability mechanisms. Paycell, on the other hand, is exposed to a more volatile macroeconomic context, with inflation and currency volatility, which increases its need for adaptive governance, credit risk management, and foreign exchange hedging. While both firms have strong dynamic capabilities, STC Bank has a breadth-oriented innovation strategy focused on new products, while Paycell has a depth-oriented strategy focused on BNPL products. The results also indicate that financial resilience mechanisms are a mediator between digital transformation and financial stability. The empirical evidence supports this notion, especially for Paycell, where rapid growth on the one hand led to market share gains but, on the other hand, increased credit risk exposure. Most of the proposed conceptual framework is supported by hypothesis testing, which shows that sensing capability has a positive effect on the velocity of innovation and risk detection. The study adds to the body of literature on fintech by demonstrating how institutional environments, organizational structures, and resilience mechanisms all contribute to achieving sustainable outcomes of digital transformation within the context of telecom-fintech ecosystems.