FinTech Investment and GDP Relationship: An Empirical Study for High Income Countries

Abstract

Technology, the internet, and demographic change have started a rapid transformation in the financial services sector. The widespread use of innovation and technology in financial services in social and economic areas made these services more effective and companies called Fintech have emerged important economic actors. The Fintech sector has generated changes in the traditional financial service understanding and the delivery of these services. In this area, Fintech companies are developing new financial business models with the help of the latest technological developments and offering innovative financial products and services such as payment services, asset management, and insurance services. This study investigates, the relationship between GDP and Fintech investment using panel causality methods from 2014Q1 to 2020Q4 for eight high-income countries: The United States, United Kingdom, Singapore, Australia, Canada, Germany, Israel, and France. The results indicate the existence of cross-sectional dependence among countries. According to Westerlund’s panel cointegration test results, a cointegration relationship between two variables has been found in the long run. In the short run, panel Granger causality variables have been found only in Germany. We find a positive effect of Fintech investment on GDP in seven countries, and we see a negative relationship in Singapore.