The Impact of Fintech on Economic Growth: 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.

The Impact of Fintech Development on Air Pollution

Over the past 40 years of reform and opening-up, China has achieved rapid economic and technological growth at the cost of severe air pollution. The emerging Fintech, as the result of financial institutions' adapting to the latest digital technology, might be a solution to reduce air pollution. This paper investigates the impact of Fintech development on air pollution using a two-factor fixed effects model based on data for prefecture-level cities in China from 2011 to 2017. The findings show that Fintech development can effectively reduce air pollution emissions, and this conclusion is proved to be robust throughout a series of tests. The mechanism analysis shows that Fintech reduces air pollution by promoting digital finance and green innovation.