The Dark Side of the Moon? Fintech and Financial Stability
IMF Working Papers, December 8, 2023
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- The Dark Side of the Moon? Fintech and Financial Stability
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Bibliographic details
- Authors: Serhan Cevik
- Published: December 8, 2023
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400261060.001
Overview and scope
- Title: The Dark Side of the Moon? Fintech and Financial Stability
- Author: Serhan Cevik
- Series: IMF Working Papers, Working Paper No. 2023/253
- Pages: 15
- Publication date: December 8, 2023
- DOI: https://doi.org/10.5089/9798400261060.001
- ISBN: 9798400261060
- ISSN: 1018-5941
- Coverage: Empirical analysis using a novel dataset tracing the development of fintech (excluding cryptocurrencies) in a panel of 198 countries over the period 2012–2020.
- Subjects / Keywords: Digital financial services, Domestic credit, Financial sector policy and analysis, Financial sector risk, Financial sector stability, Fintech, Money, Technology; keywords include capital raising, digital lending, financial innovation, return on assets, lending activity, novel dataset.
Key empirical findings
- Dataset and sample:
- Panel of 198 countries over the period 2012–2020.
- Fintech in the analysis excludes cryptocurrencies.
- Main empirical insights:
- The impact magnitude and statistical significance of fintech vary by instrument type: digital lending versus digital capital raising.
- The overall effect of all fintech instruments taken together is negative because of the overwhelming share of digital lending in total, albeit statistically insignificant.
- Digital capital raising is estimated to have a positive effect on financial stability in advanced economies, but its effect is negative in developing countries.
- Additional characterization:
- Fintech is still small compared to traditional institutions, but rapidly expanding in riskier segments of the financial sector and creating new challenges for policymakers.
Analytical emphasis and limitations (as stated)
- Focuses on correlation between fintech development and financial stability using the novel dataset.
- Excludes cryptocurrencies from the fintech definition used in the analysis.
- The overall negative effect is driven by the composition of fintech activity (dominance of digital lending), and statistical significance varies by instrument and country group (advanced vs. developing).
Implications for policymakers (as presented)
- Fintech’s rapid expansion in riskier financial segments implies evolving systemic risk considerations.
- Heterogeneous effects by instrument type and by country group suggest that policy responses may need to be instrument-specific and tailored to country circumstances (advanced economies versus developing countries).
- The emergence of new challenges for policymakers arises from fintech’s growing footprint despite its current small size relative to traditional institutions.
Source: IMF Working Paper “The Dark Side of the Moon? Fintech and Financial Stability”, Serhan Cevik, December 8, 2023.
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- Working Paper