FinTech, the delivery of financial services via digital mediums, has since the 2010’s been an area that has attracted the attention of consumers, businesses, investors, and regulators alike. The benefits have been repeated ad nauseum – equitable access to capital and services for underserved market segments, ease of use and convenience, added security measures to protect people from fraudulent activity – the list goes on. Simply put, FinTech has the potential to make using finance easier, quicker, and cheaper. It is no wonder that it has remained a hot button topic for the better half of the last decade. It seemed to be on a never-ending upward trend, continuing even today with analysts projecting the FinTech sector to grow at a CAGR of 26.2% through to 2030.
In that time, however, the world also contended with the most far reaching and severe pandemic it had witnessed in recent memory. COVID-19, which spread to become a global pandemic in early 2020, held the world at gun point. Border restrictions, quarantine measures, nationwide lockdowns – policies implemented to curb the spread of the virus – invariably brought booming post-GFC economy to a screeching halt. Businesses shuttered, stock prices plummeted, people were retrenched in the thousands – overnight, the world was at a standstill. The unequivocal pessimism was pervasive. But just as quickly as the world retreated, bright spots slowly started to emerge and the long road to recovery had begun. By 2021, several countries had rebounded admirably to almost pre-pandemic levels even as the pandemic raged on; of course, in no small part thanks to the sweeping vaccination policies most countries implemented. Though vaccines were available on a global scale, one could quickly notice that not all countries recovered at an equal pace or extent. Why was this so?
Therein lies the heart of our report, which examines the different factors that could either have a positive or negative impact on economic recovery. Did FinTech, for all its accolades, play an important role in a country’s economic recovery? To that end, we studied the impact FinTech had on determining the resilience of a country’s economy, using GDP growth and unemployment rate as proxies for economic resilience. The following was observed:
Countries with more developed FinTech industries had more resilient GDP growth
Countries with stronger FinTech development prior to the pandemic experience higher GDP growth in the face of COVID-19. Other factors considered, namely, better education, economic development, lower average population age, and less reliance on the tourism industry, also positively impacted changes in GDP growth.
Countries with more developed FinTech industries had more resilient employment levels
Countries with strong FinTech development prior to the pandemic are associated with strong employment recovery notwithstanding the pandemic, albeit to a lesser extent compared to its impact on changes in GDP growth. Instead, the maturity of a country’s digital infrastructure, prior GDP per capita, stringency of social distancing policies, and population size are the five factors which influence changes in employment rates in a positive manner more so than FinTech.
Mobile payments, a segment of the FinTech industry, had a strong positive impact on economic resilience
Mobile payments have a positive impact on both GDP growth rates and employment rates. Notwithstanding lockdown protocols, people could continue to access daily necessities through online channels. COVID-19 fundamentally reshaped consumption habits and accelerated the development of the contactless economy – an unsurprising development as contactless payment methods are meaningful tools in helping reduce the spread of the virus – which is enabled primarily by mobile payments. Other components of FinTech were also conducive to economic resilience. Digital investments have a positive impact on GDP growth rates, while digital banking has a positive impact on changes in unemployment rates.
There has been an aggregate uptick in demand for FinTech services since the pandemic, based on Google search volume data
Two observations are apparent. First, there was an overall spike in search volume for FinTech-related terms following the outbreak of COVID-19, and these levels had remained since. The main driver for this persistent high-level of interest has been demand for mobile payments. Second, developing countries and those with underdeveloped FinTech industries exhibited a higher increase in demand for FinTech services compared to countries with more developed FinTech industries, save for mobile payments, which exhibited similar rising demand in both matured and developing FinTech ecosystems.
FinTech demand in SEA is representative of the global trends
In SEA, it was observed that there was a 50% increase in demand for FinTech services from 2019 to 2020, coinciding with the outbreak of the pandemic. Moreover, the interest in mobile payments increased to 80% in the same period – indicating that the trend in SEA is in line with the global trend that mobile payments is driving overall demand for FinTech services.
Xin Chang, Simba is a Professor of Finance at Nanyang Business School and Associate Dean (Research) overseeing PhD programs and research activities at Nanyang Business School. He specializes in corporate Finance, especially capital structure, mergers and acquisitions, and stock valuation. He had taught various courses to undergraduate, honours, master, and PhD students at HKUST, the University of Melbourne, the University of Cambridge, and NTU.
Xin Deng, Cindy is an Associate Professor (Practice) in Banking and Finance department at Nanyang Business School, Nanyang Technological University. She mainly works on empirical corporate finance and Fintech. She has taught undergraduate, MBA and doctoral courses including corporate finance, international financial management, theory of corporate finance, corporate finance empirical studies and blockchains and finance.
This study is a joint work in collaboration with Ant Group and the following researchers:
Cai Cen is a PhD candidate in Finance at Shanghai University of Finance and Economics. Her research interests center on behavioral finance and FinTech.
He Yu is an Assistant Professor at China University of Geosciences (Beijing). She specializes in corporate finance, especially corporate environmental responsibilities and corporate innovation.
Peng Jiaxin is a PhD candidate in Finance at Shanghai University of Finance and Economics. She specializes in corporate finance, especially FinTech and information disclosure.
Peng Zhuozhen is a PhD candidate in Finance at Nanyang Technological University. Her research interest lies in empirical corporate finance, behavioral finance, and emerging finance topics (e.g., sustainable finance and Fintech).