The impact of monetary and fiscal policy on FinTech firms during the crisis

Abstract

The U.S. government and Federal Reserve implemented rapid and substantial interventions during the global pandemic in 2020–2021. We examine the impact of the pandemic on FinTech firms and find that the effect varies based on the size and timing of the fiscal and monetary policy actions. The concurrent actions of both the Treasury and Federal Reserve were significant in stabilizing market conditions. The Fed's balance sheet expansion during the pandemic resulted in a positive impact on FinTech. FinTech subsectors such as exchanges and automatic trading, financial data, networks, processors, and business information reacted positively to the Fed's Quantitative Easing (QE) decisions. In contrast, other sub-sectors, such as asset management, internet banking, and specialty marketplace lending, were negatively impacted. These findings are crucial for regulatory bodies and policymakers, providing insights into the effects of current policies and predicting FinTech firms' responses in future crises. This analysis underscores the nuanced and sector-specific impacts of policy actions on FinTech during periods of crisis.