Achieving Financial Inclusion through Fintech: From Digital Payments to Platform Investments

In November 2025, MS published the article “Financial Inclusion via FinTech: From Digital Payments to Platform Investments.” This article examines household finance in the era of financial technology, where digital payments are integrated with various financial services via all-in-one super apps. The article hypothesizes that increasing FinTech adoption through digital payments can reduce non-monetary costs (such as psychological barriers) associated with participating in financial markets. The research finds that higher FinTech adoption leads to greater participation and higher risk-taking in mutual fund investments. By using geographic distance to Ant Group as an instrumental variable for FinTech penetration, as well as the exogenous spread of QR code payments in Shenzhen, the study further provides causal evidence from digital payments to risk fund investment. Moreover, the impact of FinTech is more pronounced among individuals who are more constrained, have a higher risk tolerance, or live in underserved areas.

Introduction

The study first points out that FinTech, especially super apps led by Alipay, is reshaping the way households participate in finance. With the deep integration of digital payments with lending, wealth management, and other financial services on the same platform, the threshold and cost for users to access financial products have dropped significantly. The authors emphasize that traditionally low participation in financial markets mainly stems from non-monetary costs such as lack of information, trust, and familiarity, rather than pure transaction costs. Frequent use of FinTech can effectively weaken these psychological barriers, thereby naturally pushing households into risk asset investments.

Next, the study introduces the measurement of FinTech adoption and, using the backdrop of the rapid expansion of QR code payments in China from 2017 to 2019, constructs an individual-level FinTech usage indicator, QRPay. Leveraging account-level data from Ant Group, the research can precisely track users’ migration paths from digital payments to investment behavior. Further empirical analysis shows that more frequent digital payments significantly increase the likelihood of users investing in risk funds, and through identification using peer effects and geographic distance as instrumental variables, the paper provides solid causal evidence for this relationship.

Table 1: Descriptive Statistics

Table 2: Personal FinTech Application and High-Risk Fund Investment

In further analysis, the research decomposes FinTech adoption into peer-driven and individual-driven components (Peer vs Idio). The results (Table 2 Panel B) show that the coefficient for peer-driven QRPay is significantly larger, indicating that changes in investment behavior are mainly driven by exogenous technology penetration rather than individual preferences or self-selection. This decomposition provides key evidence for establishing causality.

To further verify causality, the study uses geographic distance to Ant Financial headquarters (Hangzhou) as an instrumental variable to capture the spatial diffusion of FinTech penetration. The first-stage regression (Table 3 Panel A) shows that the farther the distance, the significantly lower the QRPay; for example, the effect for the full sample is –0.241 (t=–13.20). Based on this instrumental variable, the second-stage results show that the impact of QRPay on risk fund purchase is in the 2.15%–3.63% range, and is larger than the OLS results, indicating that OLS may underestimate the true effect of FinTech and thus reinforcing the genuine causal effect of digital payment penetration on investment behavior.

2 Table 6: FinTech Application and Portfolio Risk-Taking: Analysis Based on Local Financial Coverage

The paper further explores whether FinTech truly improves investment welfare. First, the authors compare the performance of all market funds, Ant platform funds, and funds held by Ant users (Table 8 Panel A). Results show that funds chosen by Ant platform investors perform slightly better among all funds, with stock fund alphas reaching 1.00% (t=1.83), indicating that FinTech platform users have a certain degree of fund selection ability. In addition, FinTech usage intensity is significantly positively correlated with portfolio diversification (Table 8 Panel B): a one standard deviation increase in Log(QRPay) increases the number of funds held by investors by 10.6%, the number of asset classes by 6.7%, and the Sharpe ratio by 1.33%. This shows that FinTech not only enables investors to participate in risk assets but also helps them build more diversified portfolios with higher risk-adjusted returns.

The event study (Figure 4) provides direct evidence supporting the “learning–familiarity mechanism.” Before the first risk fund purchase (t=0), the treatment and control groups were almost identical in Alipay login counts and wealth page visits, confirming the validity of matching. However, after t=0, there is a huge difference: Alipay logins surged from about 10 to nearly 40, and wealth page visits jumped from near 0 to about 40, remaining at a significantly higher level for several months thereafter. This sustained behavioral change suggests that after their initial investment, users actively increase interactions with the platform, strengthen information acquisition, and deepen product understanding, confirming the mechanism of “FinTech improves financial literacy → promotes participation.”

The entry of technology firms into finance has the potential to break physical barriers and remove psychological constraints, allowing individuals to participate in financial markets more freely. FinTech platforms, by providing diversified financial services and challenging traditional institutions, highlight the urgent need for rigorous research and policy-making to protect early adopters and understand the long-term impact on household finance.

The research emphasizes the advantage of technology firms in providing comprehensive financial services through a “one-stop ecosystem.” Unlike traditional financial institutions, FinTech’s development path is to bundle payment functions with various financial and non-financial services via “super apps” like Alipay. Although the monopoly power of large tech platforms raises concerns, integrating risk asset investments into the platform remains valuable, especially in emerging markets with rapid income growth and an urgent need for financial services. Technology-based solutions are low-cost and highly scalable, filling gaps effectively where traditional financial infrastructure is lacking.

However, the development of FinTech also brings challenges. Like all innovations, FinTech has its downsides. For example, the rapid expansion of mutual fund distribution in China may exacerbate investors’ “chasing returns” behavior, leading fund managers to take on excessive risks. These phenomena highlight the complexity of FinTech regulation. There is no one-size-fits-all regulatory solution; policymakers must understand the multidimensional development of FinTech and the biases and frictions it may amplify or alleviate. Therefore, it is crucial to deeply understand how FinTech affects all aspects of household financial decision-making, underscoring the necessity for more academic research in this field.