Tetsuya Nomura's Final Fantasy series helped paved the way for the modern JRPG. By creating layered stories and complex characters, players began to care less about getting to the next objective and more about how the story would unfold. These characters and their stories were later weaved into the narrative of Kingdom Hearts, and heroes like the great ninja Yuffie, Cloud Strife and Leon (Squall Lionheart) play important roles in Sora's story.
However, when Kingdom Hearts III launched, fans were surprised by the blatant absence of Final Fantasy characters throughout the game's story. This seemed unorthodox, as these games generally walk hand-in-hand with Nomura's other series. However, once the story was complete and the credits rolled, it was clear that their absence was logical and beneficial to the story as a whole.
Most crossover appearances in videos games are brief cameos or nods to an overarching story, like Aiden Pierce from Watch Dogs appearing in Assassin's Creed. However, in Kingdom Hearts, Final Fantasy characters occasionally play major roles in pushing the story forward. For instance, Leon points Sora in the right direction through Traverse Town. However, in a game that is already heavy in exposition, these appearances can slow down the story's momentum and detract from Sora's adventure. Without them appearing in Kingdom Hearts III, the narrative ultimately flows better, with Sora making decisions that aren't sandwiched between dialogue scenes with Final Fantasy characters.
These appearances sometimes caused plot holes or dangling plot threads that didn't change or enhance the story. Often, they solely existed as fan-service. Final Fantasy VII's Cloud is a great example of this. He first appears in the Coliseum in the original Kingdom Hearts as a challenger. Players can test their might against him in the competition, but he doesn't appear anywhere else.
In Kingdom Hearts II, Cloud's enemy, Sephiroth, makes an appearance as an optional boss. Upon his defeat, he and Cloud disappear, never to be seen again. While an undeniably great moment, it holds the overall story up and without moving anything forward. Without these moments in Kingdom Hearts III, the game instead focuses exclusively on its main characters.
The absence of Final Fantasy characters from Kingdom Hearts III also helped create an emotional ending to the game. The story's final act sees Sora, Donald and Goofy taking on each member of Master Xehanort's Organization XIII; each defeat saw the return of other heroes from across the series. Without the Final Fantasy characters, Kingdom Hearts III's ending felt exclusive to the Kingdom Hearts universe and less like a major crossover, making it more powerful.
Kingdom Hearts and Final Fantasy make a great pair, bridging the gap between fans of Final Fantasy, Disney and JRPGs. However, by excluding Final Fantasy characters from Kingdom Hearts III, the story thrived and was able to properly conclude over a decade of storytelling. The Kingdom Hearts III Re: Mind DLC went on to reintroduce characters like Sid and Yuffie, but here it feels more organic and necessary rather than forced. For longtime fans, seeing them again in the DLC was refreshing, but it also reinforced that their exclusion from the base game was the right choice.