The Impact of FinTech on Environmental Degradation: An Empirical Evidence from APEC Economies

Abstract

Purpose: Fintech innovation is booming in the Asia-Pacific Economic Cooperation region, with established players and emerging start-ups like launching new products and services. This study aims to determine how Fintech affects Environmental Degradation.

Design/Method/Approach: This study consists 17 out of 21 APEC economies region based on data availability from world development indicators. The Stochastic Impacts by Regression on Population, Affluence, and Technology model utilized to formulate the conceptual frame by using 2^nd generation panel econometrics approaches.

Findings/Results: The empirical analysis reveals that FinTech has a positive impact on CO2 and GHG emissions in APEC economies, implying that advancements in financial technologies may initially drive-up environmental degradation. The Environmental Kuznets Curve (EKC) hypothesis supports an inverted U-shaped relationship between FinTech and CO2 emissions, suggesting that at early stages of FinTech development, emissions rise but may eventually decline as economies mature and adopt greener technologies. Similarly, the relationship between FinTech and GHG emissions follows a downward ∩-shaped pattern, reflecting a reduction in emissions as economic growth slows down due to diminishing returns from GHG-intensive industries. In the short run, bidirectional causality exists between CO2 emissions and the number of ATMs, and unidirectional causality from GDP to both CO2 and ATM expansion indicates that economic growth initially drives environmental degradation. However, in the long run, FinTech may contribute to greater economic efficiency, potentially reducing environmental harm.

Originality: Further research is required to fully recognize this delicate assimilation among fintech (financial technology) and environmental degradation, as well as to develop mitigation strategies for any detrimental effects. Based on the available existing literature, there doesn’t seem to be any empirical research that examines how fintech affects environmental degradation in the APEC region. There is a dearth of hard data to measure the ecological impact of fintech in APEC regions, and most existing research rely on qualitative evidence.

Research Implications:

FinTech may exacerbate environmental degradation in the short term, its long-term impact could be mitigated through sustainable practices and technological advancements in green finance. This analysis highlights the need for policies promoting eco-friendly FinTech innovations to balance the dual goals of economic growth and environmental protection in APEC economies.

Keywords: Fintech, Environmental Degradation, CO2, APEC

 JEL: G23, Q5, Q00, O53