Fintech Adoption and Household Risk-Taking

72 Pages Posted: 26 Oct 2021 Last revised: 18 Nov 2021

See all articles by Claire Yurong Hong

Claire Yurong Hong

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF)

Xiaomeng Lu

Fudan University, Fanhai International School of Finance

Jun Pan

Shanghai Jiao Tong University (SJTU)

Multiple version iconThere are 3 versions of this paper

Date Written: October 25, 2021

Abstract

Using a unique FinTech data containing monthly individual-level consumption, investments, and payments, we examine how FinTech can lower investment barriers and improve risk-taking. Seizing on the rapid expansion of offline usages of Alipay in China, we measure individuals’ FinTech adoption by the speed and intensity with which they adopt the new technology. Our hypothesis is that individuals with high FinTech adoption, through repeated usages of the Alipay app, would build familiarity and trust, reducing the psychological barriers against investing in risky assets. Measuring risk-taking by individuals’ mutual-fund investments on the FinTech platform, we find that higher FinTech adoption results in higher participation and more risk-taking. Using the distance to Hangzhou as an instrument variable to capture the exogenous variation in FinTech adoption yields results of similar economic and statistical significance. Focusing on the welfare-improving aspect of FinTech inclusion, we find that individuals with high risk tolerance, hence more risk-taking capacity, and those living in under-banked cities stand to benefit more from the advent of FinTech.

Keywords: FinTech, Digital Payment, Financial Inclusion, Consumption, Risk Taking

JEL Classification: G11, G50

Suggested Citation

Hong, Claire Yurong and Lu, Xiaomeng and Pan, Jun, Fintech Adoption and Household Risk-Taking (October 25, 2021). BOFIT Discussion Paper No. 14/2021, Available at SSRN: https://ssrn.com/abstract=3950152 or http://dx.doi.org/10.2139/ssrn.3950152

Claire Yurong Hong (Contact Author)

Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF) ( email )

211 West Huaihai Road
Shanghai, China
Shanghai, Shanghai 200030
China

HOME PAGE: http://https://sites.google.com/site/claireyuronghong/

Xiaomeng Lu

Fudan University, Fanhai International School of Finance ( email )

220 Handan Road
Shanghai, 100045
China

Jun Pan

Shanghai Jiao Tong University (SJTU) ( email )

KoGuan Law School
Shanghai 200030, Shanghai 200052
China

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