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Fintech, regtech, and financial development: evidence from China

Author

Listed:
  • Tadiwanashe Muganyi

    (Shanghai University)

  • Linnan Yan

    (Shanghai University)

  • Yingkai Yin

    (Shanghai University)

  • Huaping Sun

    (Hebei University of Technology
    Jiangsu University)

  • Xiangbin Gong

    (Tongji University)

  • Farhad Taghizadeh-Hesary

    (Tokai University)

Abstract

This study investigates the influence of fintech on developments in China’s financial sector across 290 cities and 31 provinces between 2011 and 2018. Using a two-stage least squares instrumental variable regression approach and correcting for cross-sectional dependency, simultaneity, and endogeneity of regressors, the results establish a positive link between fintech and financial development. Our findings show that fintech supports financial sector development by enhancing access (loans), depth (deposits), and savings within China’s financial institutions. We also show that the emergence of fintech in the area of financial regulation (regulatory technology: regtech) can significantly improve financial development outcomes. Therefore, it is imperative for regulators to pursue policies that balance growth in the fintech sector while mitigating the associated risks. In addition, we use the difference-in-differences approach to show that policy measures such as interest rates liberalization also positively impacted financial development during the analysis period. In our conclusion, we suggest a policy framework for balanced fintech sector growth in developing countries.

Suggested Citation

  • Tadiwanashe Muganyi & Linnan Yan & Yingkai Yin & Huaping Sun & Xiangbin Gong & Farhad Taghizadeh-Hesary, 2022. "Fintech, regtech, and financial development: evidence from China," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-20, December.
    • Handle: RePEc:spr:fininn:v:8:y:2022:i:1:d:10.1186_s40854-021-00313-6
    DOI: 10.1186/s40854-021-00313-6
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    More about this item

    Keywords

    Fintech; Regtech; Financial development; China;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G0 - Financial Economics - - General
    • G29 - Financial Economics - - Financial Institutions and Services - - - Other

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