Do FinTech platforms amplify the wealth effect?

Abstract

This paper investigates how FinTech platforms alter the relation between investment returns and consumption behaviors, using anonymized user data from Alipay, provided by Ant Financial, for 50,000 randomly selected users from August 2017 to December 2018. We introduce a novel metric, platform dependency (PlatDep), which measures the frequency of user visits to Alipay's “Fortune” page, as a proxy for individual engagement with the platform. Our findings show that users with higher PlatDep are more sensitive in their consumption expenditures to short-term investment returns. Further analysis suggests that FinTech platforms facilitate return–consumption transformation, reduce users' risk aversion, and enhance peer influence, increasing consumption sensitivity to investment returns, particularly in discretionary spending. The effect is particularly pronounced among young users and in cities with limited traditional banking infrastructure, highlighting FinTech's complementary role.