The Real Impact of FinTech: Evidence from Mobile Payment Technology

58 Pages Posted: 13 Apr 2020 Last revised: 26 Dec 2020

See all articles by Sumit Agarwal

Sumit Agarwal

National University of Singapore

Wenlan Qian

HKU Business School; National University of Singapore - NUS Business School

Yuan Ren

Zhejiang University

Hsin-Tien Tsai

National University of Singapore (NUS), Department of Economics

Bernard Yin Yeung

National University of Singapore - Business School

Date Written: March 18, 2020

Abstract

We utilize the introduction of a 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 a higher growth rate of business creation by 8.9% per month relative to business-to-business industries, with the effect driven by small firms and more pronounced among industries with a higher cost of cash handling. Underlying this pattern is a strong adoption of mobile payment and a large decline in ATM cash withdrawals during the post-shock period, as well as closure of ATM machines by the bank. The reduced transaction cost also allows consumers to increase their spending capacity, which further fosters business growth. Interestingly, part of the increased consumer demand is captured by credit card spending, which associates with more credit card opening and higher credit limit provision by the bank. We develop a model to rationalize the responses and extend the empirical evidence to understand the key structural parameters that drive the effects of mobile payment technology.

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

Suggested Citation

Agarwal, Sumit and Qian, Wenlan and Ren, Yuan and Tsai, Hsin-Tien and Yeung, Bernard Yin, The Real Impact of FinTech: Evidence from Mobile Payment Technology (March 18, 2020). Available at SSRN: https://ssrn.com/abstract=3556340 or http://dx.doi.org/10.2139/ssrn.3556340

Sumit Agarwal

National University of Singapore ( email )

15 Kent Ridge Drive
Singapore, 117592
Singapore
8118 9025 (Phone)

HOME PAGE: http://www.ushakrisna.com

Wenlan Qian

HKU Business School ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

HOME PAGE: http://sites.google.com/site/wenlanqian/

National University of Singapore - NUS Business School ( email )

15 Kent Ridge Drive
Singapore 117592, 119245
Singapore
(65) 65163015 (Phone)

Yuan Ren (Contact Author)

Zhejiang University ( email )

38 Zheda Road
Hangzhou, Zhejiang 310058
China

Hsin-Tien Tsai

National University of Singapore (NUS), Department of Economics ( email )

Singapore
Singapore

HOME PAGE: http://https://sites.google.com/view/tsaihsintien/

Bernard Yin Yeung

National University of Singapore - Business School ( email )

15 Kent Ridge Drive
BIZ 1 Level 6
Singapore, 119245
Singapore
65 6516 3075 (Phone)
65 6779 1365 (Fax)

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