The Real Impact of FinTech: Evidence from Mobile Payment Technology

Abstract

We utilize the introduction of mobile payment technology by the largest bank in Singapore in 2017 to study how mobile payment technology reshapes economic activities and stimulates business creation. After the introduction, business-to-consumer industries witnessed 18.3% more business creation relative to business-to-business industries, with the effect driven by small firms and more pronounced among industries with higher cash handling costs. Underlying this pattern is consumers’ strong adoption of mobile payment and a reduction in ATM cash withdrawals post-shock period. The reduced transaction cost also increases consumers’ spending capacity, which justifies the business growth. Interestingly, part of the increased consumer demand is credit card spending. The pattern of changes is consistent with the bank’s adjustment to the technological change: it reduces ATMs and allows more credit card openings and higher credit limits.

Keywords: FinTech, Mobile payment, Cash, Credit card, Real effect, Small business, Business creation, Entrepreneurship, Consumption, Banking, Digital economy, Transaction cost, Inclusive growth

JEL Classification: E42, D12, D14, G21, O43