The Impact of Fintech Development on Air Pollution

Abstract

Over the past 40 years of reform and opening-up, China has achieved rapid economic and technological growth at the cost of severe air pollution. The emerging Fintech, as the result of financial institutions’ adapting to the latest digital technology, might be a solution to reduce air pollution. This paper investigates the impact of Fintech development on air pollution using a two-factor fixed effects model based on data for prefecture-level cities in China from 2011 to 2017. The findings show that Fintech development can effectively reduce air pollution emissions, and this conclusion is proved to be robust throughout a series of tests. The mechanism analysis shows that Fintech reduces air pollution by promoting digital finance and green innovation.

Urban Economic Efficiency, Environmental Factors, and Digital Finance: Impacts on Sustainable Development in Chinese Cities

“…However, using the two-way fixed effects model, we find that digital financial development is significantly positively correlated with air pollution in the baseline result. After using the IV regression approach, the relationship of digital finance and air pollution changes to be negatively correlated, which is consistent with Ma et al ( 2023) [52]. We suggest that this difference in the baseline results is because the data are different.…”

“…Many researchers find that digital finance is environmentally friendly [52][53][54][55][56]. Ma et al (2023) investigate the impact of Fin-tech development on air pollution using a two-factor fixed effects model based on data for prefecture-level cities in China from 2011 to 2017, and show that Fin-tech development effectively reduces air pollution emissions [52].…”

How Can Fintech Companies Get Involved in the Environment?

“…A study in Turkey showed that fintechs educate their users on sustainability issues, which helps promote responsible consumption and production [5]. A study in China shows the growth of fintechs alone can explain the reduction in sulfur dioxide and dust levels with an R-square of 93% and 88%, respectively [38]. Including other variables in the regression model does not change the R-square.…”

“…Fintechs directly reduce environmental costs by providing digital finance and reducing the need to commute [38]. Instant payment fintechs replace cheques, credit cards, and cash [39].…”

“…Green finance stimulates green innovation [40] and productivity [34,41]. Therefore, fintechs may also be green if they ease the financing of green projects [22,38,42,43]. While some may be involved in attracting crowd funders or impact investors, others may be interested in providing small donations to initiatives that positively impact society or the environment [43].…”