The Impact of Financial Literacy on the Adoption of Defi and Centralized Fintech in Saudi Arabia

Abstract

Purpose: This research analyzes the comparative risks, scalability, and adoption of decentralized finance (DeFi) versus centralized fintech solutions in the context of Saudi Arabia. It seeks to explain the models' acceptance and intended focus on the challenges and opportunities each model presents within the financial landscape of the Kingdom. Methodology: The research followed a survey-based design which fit the systematic collection of data to be analyzed quantitatively. Stratified random sampling was used to select a representative diverse demographic sample of 525 participants. Data analysis was performed using Partial Least Squares Structural Equation Modeling (PLS-SEM) which assessed the interplay between DeFi and centralized fintech platforms through perceived risks, scalability, and adoption factors. Findings: The results demonstrated that Centralized Fintech has a marked impact on fintech adoption in Saudi Arabia, noting importance of trust and regulation. DeFi did not have any appreciable impact on adoption. Perceived Trust and Security and Financial Literacy does not appear to mediate or moderate the relationship these models have with adoption suggesting stronger external influences, such as regulatory environment, drive change. Limitations/implications: The scope of this study is limited by Saudi Arabia’s context and the use of self-reported data. Other regions could be studied along with the undergoing regulatory change, along with socio-economic factors concerning fintech adoption. Originality/value: This research is unique in focusing on the comparative analysis of DeFi and Centralized Fintech in Saudi Arabia. It also serves as an information source for policymakers and fintech developers in formulating policies aimed at increasing the region’s fintech adoption.