Demand for FinTech services also increased, mainly driven by mobile payments
SINGAPORE – Countries with more developed FinTech ecosystems showed stronger resilience against disruptions from the Covid-19 pandemic, with better economic growth and employment, a new study that looked at 86 economies worldwide to evaluate the impact of FinTech on economic resilience has found.
In collaboration with Ant Group, the Centre for Sustainable Finance Innovation (CSFI) at the Nanyang Business School, Nanyang Technological University, Singapore (NTU Singapore), conducted this study, titled “Economic Resilience during Covid-19 Pandemic – the Role and Significance of FinTech.”
Using GDP growth and unemployment rate as measures for economic resilience, the study found that countries and regions with more advanced FinTech development experienced a faster rebound in GDP growth rate and recorded stronger employment recovery during the pandemic.
The findings suggest that FinTech has a positive influence on economic resilience and may be used as a tool to cushion against shocks and to accelerate recovery in times of crisis. FinTech makes the delivery and use of financial services easy and convenient through platforms like mobile phone applications and other digital mediums, which is crucial to help mitigate the disruptions caused by lockdowns and other virus-control measures limiting physical movement, according to the study.
FinTech and economic resilience
The study weighed FinTech development against a total of 17 factors covering a country’s economic, social, political, and healthcare indicators. For example, trade levels, population size, and education development.
The results showed that FinTech had a strong positive impact on GDP growth across all countries surveyed. Similarly, the more developed the FinTech ecosystem of the country, the lower the unemployment rate. Other factors that also have a sway over positive employment rates include pre-pandemic GDP per capita, the stringency of social distancing policies, and population size.
One example of a country in Asia that achieved strong GDP growth resilience is Singapore. As a country with one of the most developed FinTech ecosystem in Southeast Asia, Singapore’s funding landscape has been less volatile compared to other countries in the region, which have largely suffered from a fall in FinTech funding caused by the pandemic. In the case of Singapore, despite an initial dip in funding, the investments in FinTech quickly rebounded by the second quarter of 2020.
The fact that Singapore has suffered less significantly compared to the rest is testament to the unrivalled confidence investors and entrepreneurs have in the country as a regional FinTech hub. This confidence stems from active regulatory support, tax treatise, political stability, adherence to free market economics, and availability of talent, the study said.
Mobile payments
The study also found that different aspects of FinTech caused varied impact on economic resilience.
Mobile payments, which comprise common payment tools like digital wallets, impacted both GDP growth and employment positively. Digital investments were conducive to GDP growth rates, while digital banking accelerated employment growth.
An analysis of global Google search data between 2017 and 2022 showed a sharp rise in searches for FinTech-related terms following the Covid-19 outbreak and the trend has remained since. These terms include ‘mobile wallet’, ‘digital banking’, and ‘online investment’. This finding reflects a persistent high-level of interest in FinTech services since the start of the pandemic. Notably, mobile payments are the main driver of the interest.
In Southeast Asia, there was a 50% increase in demand for FinTech services from 2019 and 2020, coinciding with the outbreak of the pandemic. Of this demand, interest in mobile payments recorded an 80% rise – in line with global trend observed in the FinTech services sector.
Notwithstanding lockdown protocols, people continued to have access to daily necessities through online channels. It is thus no surprise that more people turned to mobile payments and FinTech services to regain some level of normalcy during the pandemic. As a result, Covid-19 has fundamentally reshaped consumption habits and accelerated the development of the digital economy, the study stated.
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