Speaker: Jun Pan is Chair of the Faculty Council, SAIF Chair Professor, Professor of Finance, in Shanghai Advanced Institute of Finance, Shanghai Jiao Tong University
Recap:
Jun Pan presented her research using ANT Financial data on the relationship between Fintech adoption and risk taking. The importance of the research owes to the unique attributes of FinTech platforms versus traditional finance. It is critical to examine how FinTech can lower investment barriers and improve an investor’s allocation for their risk tolerance.
Pan outlined the study construction. They were given access to Alipay data by ANT Financial, and selected a sample of 50,000 monthly individual-level consumption, investments, and payments data. The data contained both online and offline usage.
The team started with the hypothesis that individuals with high FinTech adoption, through repeated usages of the Alipay app, would build familiarity and trust, reducing the psychological barriers against investing in risky assets. Measuring risk-taking by individuals’ mutual-fund investments on the FinTech platform, the research found that higher FinTech adoption results in higher participation and more risk-taking.
The second question is one of consumer gains, if any. The research found that individuals with high risk tolerance and those living in under-banked cities stand to benefit more from the advent of FinTech. This means FinTech can help improve optimal alignment of risk. FinTech convenience reduces physical costs and increases participation, while use of an app over time builds familiarity and trust.
In the open discussion portion, Long Chen the President of Luohan tried to dig into the welfare benefits of the findings, concluding with Pan that a linear relationship between more volatility in consumption and volatility in investments probably showed that some customers were overall more risk tolerant in their financial habits. Haibin Zhu of JP Morgan suggested that housing ownership and investment, which is 70% of household assets, was considered into future research.
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