The Impact of Fintech on Poverty Reduction: Evidence from China

Exploring the dual relationship between fintech and financial inclusion in developing countries and their impact on economic growth: Supplement or substitute?

This study rigorously examines the complex interplay between financial technology (Fintech), financial inclusion, and their collective effects on economic growth in developing nations. Employing a robust panel regression methodology enhanced by Panel-Corrected Standard Errors (PCSE) and Feasible Generalized Least Squares (FGLS) techniques, this research analyzes an extensive dataset comprising 108 countries categorized into low, lower-middle, and upper-middle income levels across four pivotal years (2011, 2014, 2017, and 2021). Our analysis focuses on two key dimensions of Fintech-specifically, the adoption of digital payments and e-commerce via mobile technologies-and traditional financial access indicators, including the density of ATMs, bank branches, and active banking accounts. The findings demonstrate a predominantly positive effect of Fintech variables on economic growth, particularly through improved digital payment systems. Conversely, traditional financial inclusion metrics frequently show a negative correlation with growth trajectories. Notably, our research underscores a significant positive interaction between digital payment usage and ATM density, indicating a synergistic relationship that enhances the performance of traditional banking systems. In contrast, a substitutability effect arises, where increased dependence on mobile technologies diminishes the relevance of traditional financial infrastructure, potentially obstructing broader economic growth. These findings carry critical policy implications, advocating for a cohesive strategy that fosters both Fintech innovations and traditional financial sectors to maximize economic growth and inclusivity. A deliberate emphasis on synchronizing innovative financial solutions with the strengthening of conventional banking is essential for promoting sustainable economic development in these resource-constrained regions.

Paving towards the sustainable development goals: Analyzing the nexus of financial technology, business-centric-tourism, and green growth

The world is facing crucial challenges such as environmental degradation, social inequality, and slow economic growth due to the current transformative era. These challenges constitute a significant barrier to unlocking the world's full potential. In response, green growth has emerged as a focal point in global discourse due to the pivotal shift of legislators and researchers from conventional economic growth to sustainable and green growth. This research will examine the influence of financial technology and business-centric-tourism on green growth for a full panel of 148 worldwide economies and four different income-levels during the period spanning 2004-2021. The financial technology index comprises twenty-one enabling and integrated variables that capture the intersection between finance and technology. The two-step system GMM (Generalized Method of Moment) corroborated by the 2SLS (Two-Stage Least Square) method indicates that financial technology and business-centric-tourism endorse green growth for the world overall, while mixed results were observed at different income-levels. Moreover, energy transition, globalization, and business environment positively influence green growth, while it is negatively impacted by urban transition and socio-economic conditions. This study aligns its outcomes with the SDGs (Sustainable Development Goals) of 2030 and adds value to business literature on green growth by offering significant policy implications for achieving balanced and inclusive growth.

Can fintech pave the way for a transition towards low-carbon economy? Examination based on machine learning algorithm

Realizing the coordination between the economic and environmental systems through a green growth model is an important goal for China to enter the high-quality development stage. Meanwhile, financial technology (fintech) is rapidly developing in China. To explore the relationship between the two, this research uses panel data from 276 cities in China from 2011 to 2022 and empirically tests through constructing econometric models and machine learning algorithms. The empirical result shows that fintech has an impact on green growth. Specifically, there is a U-shaped relationship between fintech and green growth, meaning that before a certain stage, fintech may have a certain inhibitory effect on green growth. After fintech exceeds a certain development level, it will promote the improvement of green growth. Further mediation tests show that innovation plays a mediating role in the impact of fintech on green growth. Additionally, this research also conducts consistency tests based on different criteria including the location, scale, and financial development level of cities. Based on the research findings, policy suggestions are proposed in this paper to promote the development of fintech and stimulate the growth of the green economy. Overall, our research sheds more light on the fintech-green growth linkage and provides new insights into comprehending the role of fintech in advancing towards a low-carbon economy.

Determinants of financial poverty alleviation efficiency: Evidence from Henan, China

Poverty alleviation is a common cause for all human beings. The purpose of this study is to evaluate the efficiency of financial poverty alleviation in 18 cities in Henan, China, and to explore the factors affecting the efficiency of financial poverty alleviation, so as to contribute new knowledge to the cause of poverty alleviation. Based on the relevant data of 18 cities in Henan, using output-oriented DEA model and Tobit regression model with bootstrap method, this study evaluates the efficiency of financial poverty alleviation in various cities in Henan, and explores the determinants of the efficiency of financial poverty alleviation. The results show that the overall poverty alleviation efficiency of Henan is high, and the financial poverty alleviation efficiencies of different cities show distinct heterogeneities. The efficiencies of financial poverty alleviation in Zhengzhou and Luoyang are 1, and there are different spaces for improvement in the efficiency of financial poverty alleviation in other cities. Financial subsidies are the most important positive factors affecting the efficiency of financial poverty alleviation. For every 1% increase in the value of financial subsidies, the poverty alleviation efficiency will increase by 0.213%. The urban-rural dualistic economic structure is negatively correlated with the efficiency of financial poverty alleviation. Every 1% increase in the value of the urban-rural dualistic economic structure will reduce the poverty alleviation efficiency by 0.11%. Industrial structure is positively related to the efficiency of financial poverty alleviation. For every 1% increase in the value of the industrial structure, the poverty alleviation efficiency will increase by 0.072%. The formulation of financial poverty alleviation policies in various regions should be combined with their own characteristics, and promote the efficiency of financial poverty alleviation by strengthening the advantages and making up for the deficiencies.

The Impact of Fintech on Economic Growth: Evidence from China

Financial technology (fintech) has seen fast development recently in China; however, studies exploring the contributions of fintech to China’s economic growth remain limited. Thus, this study motivated by the knowledge gaps and fast expansion of fintech examined: (i) the impact of fintech and the submeasures of third-party payment, credit, and insurance on China’s economic growth; (ii) the regional and provincial impact of fintech on China’s economic growth; (iii) the causality relationships between fintech and economic growth. By using a sample of 31 provinces in China and the instrumental variable generalized method of moments (IV–GMM) technique, the study established the following: (i) fintech and the submeasures of third-party payment, credit, and insurance have a statistically significant positive effect on China’s economic growth. Specifically, a 10% rise in fintech, third-party payment, credit, and insurance raises China’s economic growth by 8%, 4%, 5%, and 16%, respectively; (ii) the eastern region has the highest growth effect of fintech. Moreover, Zhejiang province has the highest growth effect of fintech at the provincial level; (iii) a unidirectional causality exists from third-party payment and credit to economic growth, and economic growth to insurance; a bidirectional causality exists between fintech and economic growth. This article explicitly suggests substantial institutional reforms to promote the healthy development of fintech in China.

The Impact of Internet Use on Perception of the Poor–Rich Gap: Empirical Evidence from China

The advancement of Internet technology has provided a great impetus to alleviate poverty and promote economic progress. However, studies on the negative impact that the development of the Internet may have on individual perceptions are still rare. This paper uses data from the China Family Panel Studies (CFPS) in 2018 to construct multiple econometric models to empirically study the impact of Internet use (ITU) on the perception of the poor–rich gap (PPRG) and its mechanism in China. The instrumental variable (IV) model and Heckman model are used to solve potential endogenous problems. The research found that ITU has aggravated the PPRG of residents, and the test results are still robust after considering various endogenous sources. Additional analysis shows that the degree of dependence on the Internet is one of the transmission mechanisms of ITU on the impact of the PPRG, and its mediating effect accounts for 32.12% of the total effect. Another test result of the impact mechanism shows that the Internet media expands the reference group of residents through virtual areas and aggravates the PPRG of residents. Some test results from the perspective of heterogeneity show that: the effect of urban residents’ ITU on PPRG is higher than that of rural residents. ITU of residents in economically developed areas has a significantly higher effect on the PPRG than residents in economically underdeveloped areas. The impact on ITU by residents of different age groups on aggravating the PPRG show an obvious increasing linear law. Our research provides an ITU interpretation path for the impact of PPRG from sociological theory and provides a new entry point for the impact of the Internet and subjective well-being.

Does Financial Technology Improve Health in Asian Economies?

The progress of the health sector in a sustainable manner is crucial for the development of human capital, a significant and vital driver of economic growth. Hence, we aim to investigate the impact of FinTech on health outcomes in Asian economies over the period 2007–2019. The empirical estimation of the study is based on the 2SLS and GMM techniques. The outcomes confirmed the negative impact of ATMs and Debit cards on the infant mortality rate in both 2SLS and GMM models. Whereas, ATMs and Debit cards positively impact the life expectancy of people living in Asian economies irrespective of the estimation technique. Similarly, the association between the Internet and infant mortality rate is negative; whereas, this association is positive in the context of the Internet and life expectancy both with 2SLS and GMM. From these findings, we can confirm that the amalgamation of technology and the financial sector helps to improve health outcomes in Asian economies. Therefore, the integration of FinTech into the health sector should be part and parcel of every health policy in emerging Asian economies.

The impacts of digital finance development on household income, consumption, and financial asset holding: an extreme value analysis of China's microdata

This paper examines the roles of digital finance development in household income, consumption, and financial asset holding from an extreme value theory perspective. Three types of extreme pairs (Min to Min, Max to Max, and Max to Min) are constructed, corresponding to the three aspects of the economic welfare of digital finance: fairness, efficiency, and their trade-off. Using panel data from the Peking University Digital Financial Inclusion Index of China (PKU-DFIIC) and China Family Panel Studies (CFPS) over time span 2014-2018, this paper models the block maxima and minima of variables by fitting them with generalized extreme value (GEV) distribution. The binary expansion testing (BET) is used to detect the nonlinear dependence between digital finance and household economic variables. The tail quotient correlation coefficient (TQCC) is used to quantify the tail dependencies. The results show that: (1) digital finance has significant fairness effects in reducing poverty, increasing consumption, and promoting financial asset holding; (2) digital finance shows effects of promoting incentives and efficiency in household income and financial asset holding, but this effect is relatively limited in household consumption; (3) digital finance generally increases efficiency without harming fairness in terms of all cases of household income and consumption, and most of the cases regarding household financial asset holding; (4) the positive spatial externality of digital finance exists for all household economic variables; and, for pairs regarding household income and consumption, the wider the scope, the greater the spatial spillover effect. The result of this paper implies many novel policy implications.

Unlocking the Potential of Fintechs for Financial Inclusion: A Delphi-Based Approach

The financial sector is experiencing an accelerated process of transformation shaped by fintechs, which opens an important window of opportunity to increase financial inclusion in emerging markets, such as Brazil, with high financial exclusion. Thus, this article investigates, through a Delphi approach involving fintech professionals, the potential of fintechs to enable financial inclusion in emerging markets, using Brazil as a proxy. The analysis carried out identified three domains related to fintechs that have the potential to impact financial inclusion: (i) fintechs can serve niches of people without a bank account in the traditional financial market, (ii) fintechs can reduce costs for clients through increased competition, and (iii) fintechs can offer financial services in remote locations, far from traditional financial institutions. Thus, with the objective of developing a public agenda of financial inclusion through fintechs, the article proposes four lines of public policies: (i) expansion and modernization of mobile and internet infrastructure, (ii) improvement of the population’s financial and digital education, (iii) implementation of a trustworthy environment for the fintech clients, and (iv) development and enforcement of an effective legal and regulatory framework for fintechs. These policies, if implemented, can benefit people excluded from the financial system around the world.