Technological Forecasting & Social Change 163 (2021) 120442

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Technological Forecasting & Social Change

journal homepage: www.elsevier.com/locate/techfore

Should the fourth industrial revolution be widespread or confined

geographically? A country-level analysis of fintech economies
Zhilun Jiao a, Muhammad Shehryar Shahid b, Nawazish Mirza c, Zhixiong Tan d, *
a
College of Economic and Social Development, Nankai University, Tianjin, China
b
Suleman Dawood School of Business, Lahore University of Management Sciences, Lahore, Pakistan
c
Excelia Business School, La Rochelle, France
d
School of Public affairs, Chongqing University, China

A R T I C L E I N F O A B S T R A C T

JEL Codes: One of the major beneficiaries of the fourth industrial revolution is fintech. However, despite the unprecedented
G23 growth of, investment in, and returns generated by this sector, a conducive environment and fintech support
G28 ecosystem is essential to exploit the true potential of fintech. The biggest challenge for many governments across
O33
the globe is not only setting priorities in which fintech services to invest (e.g., digital wallets, peer-to-peer
R58
lending, e-insurances) but also in which geographical area to invest. Since technology is independent of phys­
Keywords:
ical interaction and geographical confinement, governments face a dilemma: keep fintech growth geographically
Fintech
4ir
diverse or concentrated within a few cities. This study evaluates the fintech success of countries with its spread in
Geographical concentration different cities and attempts to formulate a policy direction to accelerate the wave of the fourth industrial
Regulations revolution. Our results suggest that rather than a widespread presence, countries should concentrate their efforts,
Agglomeration investment, and attention to developing a fintech ecosystem in fewer cities to facilitate them as much as possible.
Distribution This concentrated effort could help countries improve their Global Fintech Scores and specialize in specific core
areas.

1. Introduction
The fourth industrial revolution has significantly impacted different
sectors of the economy, including the financial sector (Schwab, 2017).
The unprecedented advancement in artificial intelligence and the
Internet of Things has caused an abrupt change in the financial system,
and the financial sector has dramatically changed the way it functions,
hence providing new opportunities to investors. The advancement of
new technologies in the fields of information and communication is
strongly associated with financial sector performance and its profit­
ability and development (Palmié et al., 2020; Su et al., 2020c).
The major beneficiary in the financial industry, owing to the ad­
vancements triggered by the fourth industrial revolution, is fintech,
which is a more advanced type of technological innovation set in the
financial field (Chang et al., 2020; Schindler, 2017). Cryptocurrencies,
digital trading systems, artificial intelligence, and mobile payment sys­
tems are some of the cutting-edge technological innovations in the
financial field (Philippon, 2016; Su et al., 2020b). Fintech is a core field
of industry 4.0 growth as it involves the use and convergence of various
technologies, such as AI and data science, and offers a forum comprising
service and applications for industry 4.0 (Dhanabalan and Sathish,
2018; Mashelkar, 2018). Fintech growth and the amount of investment
made in the sector is enormous, and the returns are even higher. Fintech
companies worldwide are working to transform how financial assets are
formed, managed, and traded and, hence, affect almost every financial
activity from banking to payments to risk management (Ana­
gnostopoulos, 2018). These fintech companies offer services to financial
institutions involving customer acquisition and risk management.
Therefore, these companies provide a viable solution to financial in­
stitutions by offering new, sophisticated ways to connect with their
customers and expand access to a wide range of financial products
(Pólvora et al., 2020). The use of fintech to automate investments, in­
surance, and banking services has significantly increased since the 2008
global financial crisis. With the introduction of intelligent technologies
in the fourth industrial revolution, an unprecedented increase in pro­
ductivity growth is expected (Cockburn et al., 2018).

* Corresponding author.
E-mail addresses: zjiao@nankai.edu.cn (Z. Jiao), muhammad.shehryar@lums.edu.pk (M.S. Shahid), elahimn@excelia-group.com (N. Mirza), tzxcqu@126.com
(Z. Tan).

https://doi.org/10.1016/j.techfore.2020.120442
Received 13 July 2020; Received in revised form 29 October 2020; Accepted 31 October 2020
Available online 24 November 2020
0040-1625/© 2020 Elsevier Inc. All rights reserved.
Z. Jiao et al.
Although, the success of fintech may depend upon several factors,
the role of government policymaking in creating a conducive environ­
ment and fintech support ecosystem cannot be underestimated. We
believe that the biggest challenge for many governments and policy­
makers worldwide is not to set priorities in which fintech services they
should invest in, for example, digital wallets, peer-to-peer lending, e-
insurances. Developing an expertise and niche in any of the above­
mentioned fintech service areas is a nontrivial task and requires careful
evaluation of countries’ existing financial, technological, and economic
structure. However, the bigger question in conjunction with this choice
is deciding whether agglomerated fintech growth should be agglomer­
ated or distributed. A significant amount of literature advocates the
distributed growth pattern of technology-based industries like fintech,
as the technology is independent of physical interaction and geograph­
ical confinement (Cairncross, 2002). However, many studies have re­
ported that companies dependent on internet applications are
geographically concentrated in a few prominent locations in the United
States and around the world (Zook, 2000)). These studies present a
compelling case for the concentration of fintech industries in fewer cities
citing advantages in terms of profitability, cost reduction, and speciali­
zation. These studies claim that countries that concentrate their efforts,
investments, and attention towards improving fintech industries in a few
cities could reap the true benefits of its potential. Therefore, compared
to the widespread presence of the fintech ecosystem in many cities,
concentration within fewer cities is a better policy alternative for gov­
ernments to spur the growth of the fintech industry.
This study evaluates the fintech success of countries with its spread
in different cities and attempts to formulate a policy direction for gov­
ernments to further accelerate and effectively and efficiently exploit the
wave of fourth industrial revolution. The major objective is to answer
the questions raised in a previous paragraph that can provide future
direction in pursuing concentrated versus dispersed growth of the fin­
tech industry in a fewer or larger number of cities. Moreover, the study
also examines the determinants of fintech success in a global cross-
sectional setting.
This study contributes to the existing literature by using the Fin­
dexable Global Fintech Index, which calculates the ranks and score of
fintech ecosystems of more than 230 cities, 65 countries, and 7000
companies worldwide. The index was recently constructed through al­
gorithm by Findexable. Moreover, the study introduces a new set of
explanatory variables, such as the Number of Cities in Global Fintech
Ranking (NCTY), the cumulative fintech score of its cities, Gross Do­
mestic Product (GDP), Gross Capital Formation (GCF), Gross Domestic
Savings (GDS), Trade Volume (TV), and Foreign Direct Investment In­
flows (FDII). This is the first to use the Global Fintech Index to examine
its determinants across countries.
Our results report that the global fintech score of countries is strongly
dependent on the cumulative fintech score of its cities. However, this
score is negatively correlated with the number of cities listed in the
Findexable Global Fintech Index. This clearly suggests that a fintech
ecosystem which is distributed, widespread, and present in a large
number of cities is detrimental for the country’s overall performance in
the global fintech ranking. These results have great policy implications
for the policymakers responsible to develop and promote the fintech
ecosystem in any country.
The rest of the paper is organized as follows. Section 2 provides a
literature review, Section 3 introduces data and methodology and the
hypothesis developed, Section 4 presents and discusses our results, and
Section 5 concludes the study.
2. Literature review
Fintech, a more advanced type of technological innovation set in the
financial field, is the major beneficiary in the financial industry owing to
the advancements triggered by the fourth industrial revolution (Chang
et al., 2020; Schindler, 2017). The role of technological innovation in
2
Technological Forecasting & Social Change 163 (2021) 120442
affecting domestic productivity and financial development is widely
discussed in the literature (Beccalli, 2007; Erzurumlu and Pachama­
nova, 2020; Lee et al., 2016; Romer, 1990). Technological progress
improves bank performance and leads to an increase in domestic pro­
ductivity (Hõbe and Alas, 2015; Katz et al., 2014; Su et al., 2021). Ac­
cording to Katz et al., 2014, automation and artificial intelligence have
altered the banks’ organizational structure and performance. Due to the
diffusion of digital technologies, the capacity of the banking sector has
strengthened. Moreover, digitalization through e-banking initiatives has
improved the banks’ performance. Digital technologies in the form of
e-banking have promoted healthy competition among businesses and
are thus essential in improving the banking sector’s performance.
Additionally, research has been conducted to investigate the important
role of fintech and financial development in the trading system, banking
system, energy, and in improving the banking sector’s performance
(Alfaro et al., 2004; Beck and Levine, 2004; Berger and DeYoung, 2001;
Gozman et al., 2018; Hosseini et al., 2015; Mell and Grance, 2011; Su
et al., 2020a).
Moreover, fintech has remarkably changed the financial methods in
the delivery of financial services. The innovation of advanced technol­
ogies in finance is widely recognized to promote the development of
fintech (Shim and Shin, 2016). By reshaping and redesigning the
financial landscape, fintech has affected many aspects of the economy,
such as the trading system, banking system, and energy (Gozman et al.,
2018). Fintech may also improve the delivery services of banks, which
improves their competitiveness and, hence, strengthens the financial
sector (Berger and DeYoung, 2001). Moreover, fintech may affect
financial development by increasing the profitability of banks,
competitiveness, and performance (Hõbe and Alas, 2015). Hence, fin­
tech, a source of competitive advantage, is the major driver of financial
sector performance (Brem et al., 2016). Countries worldwide are testing
new financial innovations due to the rapid spread of internet access.
Similarly, emerging economies are experimenting with new financial
innovations because of the rapid and expansive spread of internet access
worldwide (Mell and Grance, 2011). Hence, individuals, businesses, and
governments utilize internet infrastructure to access innovative cloud
computing services. The development of the fintech revolution strongly
depends on the different pillars of innovations. New ventures can be
tracked in several start-up areas, including fintech start-ups. The world
is witnessing a major breakthrough in start-up funding since the global
financial crisis in 2008. Hence, in the majority of productive areas of the
global economy, capital is available for financial services innovation.
Using a small sample of “pure lay” internet banks, DeYoung, 2001
found that fintech enhances financial deepens by improving banks’ de­
livery services and their competitiveness. Research on the determinants
of fintech is scant until the financial crisis of 2008. However, recently,
the subject received immense importance from researchers. Studies are
conducted to analyze the factors responsible for improving fintech.
Research in this regard can be divided into two groups: micro- and
macro-level factors responsible for fintech. On the micro level,
numerous studies are conducted to identify the FACTORS responsible
for fintech (Hosseini et al., 2015). In the literature, easefulness, relative
advantage, perceived risk and awareness towards fintech products and
services, perceived cost, age, and education are considered as important
factors affecting responsiveness towards fintech products and services.
Moreover, Frost (2020) considered demographics and market failures
essential factors affecting the adoption of fintech. Research on the
macro-level determinants of fintech is limited (Claessens et al., 2018;
Schindler, 2017). Using worldwide data, Claessens et al. (2018) found
that income level and banks’ market power are important factors
affecting fintech credit.
Furthermore, start-ups have changed the financial industry structure
by developing new technologies. Hence, the needs of the financial ser­
vices consumers are addressed in more sophisticated ways. Further, the
foundation of the fintech revolution is based on extending consumer
access outside branches and offering services in new and attractive ways
Z. Jiao et al.
beyond routine hours (Gozman et al., 2018). However, the major threat
that fintech is facing is the lack of trust in its platforms. Unlike present
investors, future investors may not trust fintech platforms (Dhar and
Stein, 2017). In this regard, policymakers are in search of a viable so­
lution to device strategies to instill trust for fintech platforms in future
generations. Anti-money laundering laws and risk management are
essential to assure trust from the future generation (Kauffman et al.,
2017). Fintech has widespread implications from payment services to
lending and deposit services. Technological progress has remarkably
transformed the nature of payment services from traditional to more
advanced modes. Automation and artificial intelligence, known as new
Global FT Score of Country = f (Cities in FT Ranking, Cumulative FTScore of Cities)
digital technologies, have altered banks’ organizational structure and
performance. Due to the diffusion of digital technologies, the banking
sector capacity has strengthened.
Similarly, the digitalization through e-banking initiatives has
improved banks’ performances. Digital technologies in the form of e-
banking have promoted healthy competition among businesses and
hence, play an important role in improving the banking sector’s per­
formance (Katz et al., 2014). Fintech has transformed payment ser­
vices and ultimately new revenue strategies are devised (Geng and
Kauffman, 2017). The introduction of advance technologies in the
banking system coupled with well-functioning financial markets pro­
vide a path for entrepreneurs to launch a new business or expand an
existing one (Alfaro et al., 2004). However, to reap the true benefits of
fintech, a conducive environment and fintech support ecosystem is
essential, and is primarily the responsibility of government. The
biggest challenge for governments across the globe is not only to set
priorities to invest in, such as digital wallets, peer-to-peer lending,
e-insurances, but also in which geographical area to invest. Since
technology is not dependent on physical interaction, the governments
are facing a dilemma on whether to keep fintech growth diverse and
widespread geographically or concentrated within a few cities or
geographical locations.
As for the factors contributing to the success of fintech, researchers
found that fintech credit to be higher in countries with high income level
and existence of limited competition. Schindler (2017) used the supply
and demand framework to analyze the major determinants of fintech.
The authors identified technology, regulation, changes to the financial
or macroeconomic landscape, and innovation spirals as the supply side
determinants of fintech with regulation and demographics as the de­
mand side determinants of fintech. Any factors that affect the supply and
demand of financial services will ultimately affect fintech. Tan et al.,
2019, while evaluating the fintech landscape in Indonesia, identified
customer preferences, convenience, speed, and cost of financial services
as important factors for stimulating the demand for fintech.
Therefore, the success of fintech depends on economic, social, and
democratic (Rizvi et al., 2018, 2017) factors such as NCTY, the cumu­
lative fintech score of its cities, GDP, GCF, GDS, TV, and FDII. Countries
that have concentrated their efforts, investment, and attention to only
few cities to facilitate fintech have reaped its true benefits.
Many researchers have linked these benefits directly to the proximity
and geographical distance within which technology or research-based
organizations exist (Owen-Smith and Powell, n.d.;Ponds et al., 2007;
Hoekman et al., 2009; Plotnikova and Rake, 2014). Researchers have
analyzed that how knowledge is transferred depends on the geograph­
ical distance process (Audretsch and Feldman, 1996; Ponds et al., 2007).
These researchers believe that when the distance is short, the knowledge
is transferred more efficiently, especially through face-to-face or casual
meetings (Audretsch and Feldman, 1996; Paci and Usai, 2000).
3
Technological Forecasting & Social Change 163 (2021) 120442
Geographic proximity favors social interactions and trust building
(Boschma, 2005; Ponds et al., 2007). However, collaboration with
distant organizations leads to higher transmitting costs; therefore, it is
more difficult and less efficient (Audretsch and Feldman, 1996). Hence,
compared to the widespread presence of fintech ecosystems in a large
number of cities, concentration on few cities is more feasible for fintech
to improve.
3. Methodology
We first specify the conceptual model for our study given below.
(1)
This explains that a country’s global fintech score is a function of the
number of cities in that country that are the part of the global fintech
ranking and the cumulative fintech (FT) score of those cities. We then
structure the econometric model based on the conceptual model in Eq.
(1) in a primary setting of a single linear regression by incorporating the
presence of control variables and a residual term:
y = β0 + β1 x1 + β1 x2 + … + βk xk + ε (2)
Where y is the global FT score of a country (GFTSC), x1 and x2 are two
fintech variables, that is, NCTY and the cumulative FT Score of cities in
each country (CFTS), and xk is the vector of macroeconomic control
variables which include GDP, GCF, GDS, TV, and FDII.
Finally, due to the non-linearity observed in the descriptive statistics
table, we structure our model in a log-log form, and the finalized
econometric specification is as follows:
log(GFTSCi ) = β0 + β1 log(NCTYi ) + β2 log(CFTSi ) + β3 log(GDPi )
+ β4 log(GDPPCi ) + β5 log(GCFi ) + β6 log(GDSi )
+ β7 log(TVi ) + β8 log(FDIIi ) + εi . (3)
3.1. Model diagnostic
One of the major issues in cross-sectional regressions is the presence
of heteroscedasticity. To ensure that the log-log transformation does not
violate the assumptions of homoscedasticity, we conduct a Breusch-
Pagan-Godfrey (BPG) test proposed by Breusch and Pagan (1979) and
Godfrey (1978, 1996). A BPG is a Lagrange multiplier test with the null
hypothesis of NO heteroscedasticity. A failure to reject the null hy­
pothesis indicates that the model is correctly specified and not plagued
by heteroscedasticity.
3.2. Data description
We extract core data from the Global Fintech Index City Rankings
Report (Findexable, 2019) and modify it as per our needs to acquire
fintech variables which are the global fintech score for countries, a
number of cities included in global fintech ranking within each country,
and the cumulative fintech score of cities within a country. The report
includes the global fintech ranking of 65 countries, which we then
further classify into seven geographical regions as per the classification
provided by the World Bank: East Asia and Pacific, Europe and Central
Asia, Latin America and Caribbean, Middle East and North Africa, South
Asia and Sub-Saharan Africa. We also divide the sample of 65 countries
into different income groups specified by the World Bank, that is, High
Income, Low Income, Lower Middle Income, and Upper Middle Income
to analyze the data adequately. The second set of variables, macroeco­
nomic in nature and used primarily as control variables, have been
Z. Jiao et al. Technological Forecasting & Social Change 163 (2021) 120442

obtained from the World Bank data indicators WDI. Table 1b

Global Fintech Score Across Income Group of Countries.
Income Groups Mean Score Std. Dev.in Score No of Obs.
3.3. Hypotheses building
High income 12.14147 4.691851 38
To develop the appropriate policy response referring to the core Low income 4.037000 NA 1
Lower middle income 7.783000 2.138518 11
question in this study, we develop the following two hypotheses:
Upper middle income 8.787200 1.986892 15
Hypothesis 1. Fintech success of a country is dependent on its widespread All 10.50514 4.302733 65

presence, that is, Number of Cities in Global Fintech Ranking. Table 1b reports the mean Global Fintech Score across different income groups
of countries to assess which income group countries have high fintech pene­
To test this hypothesis, we examine the coefficient of a number of
tration and success. Variability across countries in mean fintech Score for a
cities (β1 ) in Eq. (3). This coefficient indicates that the higher the particular income group by reporting the standard deviation of Global Fintech
number of cities in a country included in the global fintech ranking, the Score.
higher the score and success of that country in the ranking.
Hypothesis 2. Fintech success of a country is dependent on the cumulative
Table 2
fintech score of its cities that have a fintech infrastructure and ecosystem and
Descriptive Statistics of Fintech Variables.
are included in the global fintech ranking.
GFTSC NCTY CFTS
To test this hypothesis, we would examine the coefficient of cumu­
Mean 10.50514 3.430769 27.70011
lative fintech Score of cities (β2 ) in Eq. (3). A positive sign of this coef­ Median 9.983000 1.000000 11.69800
ficient indicates that the higher the cumulative fintech score of cities in a Maximum 31.78900 72.00000 563.5440
country, the higher would be the score and success of the country in the Minimum 3.941000 1.000000 4.160000
global fintech ranking. Std. Dev. 4.302733 8.938976 70.79714
Skewness 2.270165 7.120886 6.867961
Kurtosis 11.56696 54.96716 52.13665
4. Results and discussions Jarque-Bera 254.6035 7863.413 7050.023
Probability 0.000000 0.000000 0.000000
Sum 682.8340 223.0000 1800.507
4.1. Some stylized facts
Sum Sq. Dev. 1184.865 5113.938 320,783.0
Observations 65 65 65
Tables 1a and 1b below provide the distributional characteristics of
the average global fintech score in different geographical regions and for Table 2 provides the results of descriptive statistics of our core variables for the
65 countries included in Findexable Global Fintech Index, that is, GFTSC, NCTY,
countries in different income groups, respectively.
and the CFTS.
Even a cursory look of Table 1a explains that the region with the
highest fintech score is North America, albeit with only two countries.
Europe and Central Asia rank second in the score; however, the spread of (NCTY), and the Cumulative Global Fintech Score of Cities for each
fintech is much more extensive in this region as depicted by the number country (CFTS).
of countries (31), which comprise approximately 50% of the countries One of the most prominent features of descriptive statistics were the
included in global fintech ranking. extremely high values of Kurtosis for almost all fintech Variables. This
The statistics reported by Table 1b are highly interesting, which proved that the fintech variables are not normally distributed across
clearly presented a pattern that countries with high income also have countries, and a high probability of having some countries with
higher global fintech Score despite being large in number. The order of extremely high values of such variables exists. For example, if we check
fintech score was perfectly aligned with that of income classification, the data, we would immediately realize that United States, which holds
and this justifies our selection of control variables, which primarily the first position in terms of global fintech ranking with a total score of
revolve around the income and related macroeconomic variables such as 31.789, has around 72 cities wherein fintech industry infrastructure is
GDP, GFC, GDS, and so on. Another interesting finding was that the present, and the cumulative fintech score of these 72 cities was 563.54.
dispersion in a score was highest in high-income countries, showing an These are values that correspond to the row containing maximum values
unequal penetration of fintech among countries falling in this group. in Table 2. Since all the fintech variables are positively skewed as pre­
Interestingly, this dispersion is the lowest in Upper Middle-income sented by the value of skewness, we should not expect to see the pres­
group countries showing equal penetration of fintech in these coun­ ence of the fat tail phenomenon (high kurtosis) on the left-hand side or
tries. Table 2 provided the results of descriptive statistics of our core lower end of the distributions.
variables, that is, Global Fintech Score of a Country (GFTSC), Number of Table 3 provides the correlation structure between fintech variables
Cities which are the part of global fintech ranking within each country and justifies the hypotheses we built in the earlier section. From Table 3,
it is evident that the number of cities with fintech presence and the
cumulative score of cities are highly positively correlated with the
Table 1a
Global Fintech Score Across Regions.
Geographical Regions Mean Score Std. Dev.in Score No of Obs.
Table 3
East Asia & Pacific 10.70492 3.118762 12 Correlation Structure.
Europe & Central Asia 11.14858 3.421081 31
Correlation Probability GFTSC NCTY CFTS
Latin America & Caribbean 8.906714 2.243234 7
Middle East & North Africa 8.459800 3.578802 5 GFTSC 1.000000
North America 22.55550 13.05814 2 –
South Asia 7.257333 4.132848 3 NCTY 0.706447 1.000000
Sub-Saharan Africa 7.448000 2.221740 5 0.0000 –
All 10.50514 4.302733 65 CFTS 0.737929 0.996601 1.000000
0.0000 0.0000 –
Table 1a reports the mean global fintech score across different regions in the
globe to assess which region has high fintech penetration and success. We also Table 3 provides the correlation coefficients and the probability to test the sig­
report variability across countries in the mean fintech score for a particular nificance of it between different pairs of core variables, that is, GFTSC, NCTY,
region by reporting the standard deviation of the global fintech score. and the CFTS.

4
Z. Jiao et al. Technological Forecasting & Social Change 163 (2021) 120442

Table 4
Parameter estimates of the log-log model for global fintech scores.
Dep. Var: LN(GFTSC) LN(GFTSC) LN(GFTSC) LN(GFTSC) LN(GFTSC) LN(GFTSC) LN(GFTSC) LN(GFTSC)
1 2 3 4 5 6 7 8

C 2.119330 0.469113 1.613399 0.925283 0.677046 0.793598 0.464524 0.477672

(0.0822)** (0.2802) (0.6024)** (0.5424) (0.6019) (0.5985) (0.7753) (0.7858)
LN(NCTY) 0.268241 − 0.518827 − 0.585361 − 0.449624 − 0.448679 − 0.418533 − 0.414399 − 0.414539
(0.0526)** (0.0985)** (0.0880)** (0.0820)** (0.0824)** (0.0760)** (0.0708)** (0.0670)**
LN(CFTS) 0.798150 0.929660 0.750102 0.754805 0.720102 0.712068 0.722908
(0.1208)** (0.1158)** (0.1023)** (0.1024)** (0.0989)** (0.0919)** (0.0885)**
LN(GDP) − 0.054823 − 0.048784 − 0.053813 − 0.050183 − 0.033845 − 0.037006
(0.0247)* (0.0224)* (0.0210)* (0.0222)* (0.0316) (0.0336)
LN(GDPPC) 0.096517 0.097263 0.088931 0.074740 0.074584
(0.0180)** (0.0183)** (0.0190)** (0.0254)** (0.0258)**
LN(GCF) 0.116587 0.042318 0.018646 0.021456
(0.0787) (0.0770) (0.0819) (0.0806)
LN(GDS) 0.055438 0.034213 0.026731
(0.0264)* (0.0348) (0.0368)
LN(EXPORTS) 0.052424 0.074482
(0.0488) (0.0442)
LN(FDIINFLOWS) − 0.019777
(0.0238)
Observations: 65 65 64 64 64 64 64 64
R-squared: 0.3772 0.7394 0.7609 0.8477 0.8527 0.8579 0.8616 0.8635
F-statistic: 38.1553 87.9726 63.6589 82.1232 67.1416 57.3485 49.7853 43.4863
Prob(F-stat): 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000 0.0000

()* Rejects the null hypothesis that the estimated parameter is equal to zero at 5% significance level.
()** Rejects the null hypothesis that the estimated parameter is equal to zero at 1% significance level.
Table 4 reports the results of a different specification of the log-log model reported in Eq. (3). The GFTSC is the dependent variable, and the NCTY and the CFTS are the
major independent variables including the set of control variables.

countries’ overall global fintech score. The results of all three specifications practically support the same
inference that we have drawn on the basis of the results reported in
4.2. Model parameters Table 4. These results consistently report the potential negative impact
of a large number of cities with fintech infrastructure on the overall
In Table 4 below, we present the results of Eq. (3) which is a log-log fintech score of a country. Similarly, all three specifications reiterate the
model. The estimated coefficients of the log-log model are the elasticities positive relationship between a country’s and its cities’ fintech scores
of respective variables for the global fintech score of countries and
describe how much percentage change could occur in global fintech Table 5
score should one percentage change occur in an independent variable. Parameter estimates of the log-log model for global fintech scores using OLS,
Table 4 shows that except specification, where we regress the GFTSC 2SLS, and GMM as robustness checks.
only on the number of cities, the coefficient for the NCTY is negative and Method: LS TSLS GMM
significant. This is an extremely important result as it provides a basis for Dep. Var: LN(GFTSC) LN(GFTSC) LN(GFTSC)
us to reject Hypothesis 1, which assumed that the fintech score of a C 0.477672 0.452446 1.106780
country is dependent on its widespread presence (more number of cities) (0.7858) (0.7984) (0.8809)
LN(NCTY) − 0.414539 − 0.334585 − 0.654824
and warrants that the sign of estimated coefficient should be positive.
(0.0670)** (0.3531) (0.3540)
Contrary to this ex-ante belief, the actual sign was negative, indicating LN(CFTS) 0.722908 0.638927 1.049622
that if countries choose to promote widespread growth of fintech in a (0.0885)** (0.3659) (0.4012)*
large number of its cities, it may actually harm the country in terms of its LN(GDP) − 0.037006 − 0.030192 − 0.088384
global fintech ranking. (0.0336) (0.0402) (0.0560)
LN(GDPPC) 0.074584 0.077376 0.062717
The second fintech variable, which is the cumulative score of cities in
(0.0258)** (0.0312)* (0.0339)
a country that are included in global fintech ranking, has an estimated LN(GCF) 0.021456 0.007477 0.097788
coefficient which is not only significant but positive in all specifications (0.0806) (0.0941) (0.1244)
from 2 to 8. This suggests that global fintech score of a country is LN(GDS) 0.026731 0.036304 − 0.010334
(0.0368) (0.0519) (0.0504)
positively correlated with the cumulative score of the cities’ fintech
LN(EXPORTS) 0.074482 0.076330 0.079912
score. These findings are extremely important when we examine the sign (0.0442) (0.0456) (0.0463)
and significance of the two fintech variables together, which helps us LN(FDIINFLOWS) − 0.019777 − 0.019730 − 0.037240
understand that although the country’s fintech score and its ranking is (0.0238) (0.0243) (0.0265)
derived from the performance of its cities, a high cumulative score of Observations: 64 64 64
R-squared: 0.8635 0.8609 0.8285
cities does not require investment and fintech infrastructure develop­
F-statistic: 43.4863 39.3707 NA
ment in a large number of cities. Only a few cities with the right type of Prob(F-stat): 0.0000 0.0000 NA
fintech Ecosystem and necessary investment and projection could help a
()* Rejects the null hypothesis that the estimated parameter is equal to zero at a
country to boost its position in the Global Fintech Index.
5% significance level.
In addition to fintech variables, from the list of control variables, GDP
() ** Rejects the null hypothesis that estimated parameter is equal to zero at a 1%
per capita seems to be consistently impacting the GFTSC. These findings significance level.
are similar to the findings of Table 1b where we observe that countries Table 5 reports the results obtained from OLS, 2SLS, and GMM estimations for
categorized in high income group tend to have high fintech scores. the model reported in Eq. (3). The GFTSC is the dependent variable, and NCTY
Table 5 provides least squares, 2SLS, and GMM estimates for the and the CFTS are the major independent variables including the set of control
entire list of variables including fintech and controls. variables.

5
Z. Jiao et al.
and the supportive role of GDP per capita in improving a country’s
performance in Global Fintech Index.
5. Conclusion
As fourth industrial revolution accelerates, countries face several
questions and challenges to take the full benefit of this revolution. One
such question is how to reap the benefits of the fourth industrial revo­
lution in the domain of fintech, wherein the results of the fourth in­
dustrial revolution are most visible. Many countries around the world
are in the process of making policies and strategic decisions that develop
and promote conducive ecosystem for fintech. However, the biggest
challenge for governments is in setting priorities of whether the path of
agglomerated fintech growth should be followed or the distributed
growth. Significant literature that advocates the distributed growth
pattern for technology-based industries such as fintech. However, many
studies have reported that technology- and internet-based companies
are geographically concentrated in a few prominent locations in the
United States and around the world (Zook, 2000). These studies advo­
cate for the concentration of fintech industries in fewer cities, citing
advantages in profitability, cost reduction, and specialization. In this
study, we evaluate the fintech success of the countries associated with
widespread growth in a large number of cities or concentrated within a
few. Our results suggest the fact that although the global fintech Score of
countries is strongly dependent on the fintech Score of its cities, having a
fintech ecosystem is widespread and present in a large number of cities is
actually detrimental for the country’s overall performance in global
fintech ranking. The right strategy for countries is to perhaps, pick and
choose few geographical locations and provide right kind of infra­
structure, fintech ecosystem and investment to those locations or cities,
if they want to excel in global fintech ranking.
Acknowledgments
Scientific Researching Fund Projects of the School of Public Affairs,
Chongqing University in 2019 (2019GGXY01; 2019GGXY02); Colleges
of Chongqing University Innovation Ability Enhancement Program
(2019CDSKXYGG0042); the Fundamental Research Funds for the Cen­
tral Universities of Chongqing University (2017CDJSK01XK18); the
Asian Research Center of Nankai University (AS2016)
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Su, C.-.W., Qin, M., Rizvi, S.K.A., Umar, M., 2020a. Bank competition in China: a blessing Muhammad Shehryar Shahid is an Assistant Professor at Suleman Dawood School of
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org/10.1080/1331677X.2020.1820361. Entrepreneurship Working Group at the university. His-research interests lie in the areas of
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the risks of geopolitical events? Technol. Forecast. Soc. Change 159, 120182. htt
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Nawazish Mirza is an Associate Professor of Finance at La Rochelle Business School –
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Excelia Group, France. His-research interests include financial technology, credit ratings,
revolution: can bitcoin improve prospects of energy investment? Technol. Forecast.
risk management, financial intermediation and valuations. He has extensive professional
Soc. Change 158, 120178. https://doi.org/10.1016/j.techfore.2020.120178.
and consulting experience in credit ratings, investment banking and valuation of new
technologies.
Jiao Zhilun, Male, Ph.D., Assistant Professor in College of Economic and Social Devel­
opment, Nankai University. Deputy Secretary of Research Institute of Intelligent Logistics.
Zhixiong Tan is an associate professor in School of Public Administration, Chongqing
Consultant of JD Logistics Company. As a visiting scholar, I stayed in University of
University, with a Ph.D. in Technical Economics and Management. His-research interests
Maryland in United States for 1 year, and in Jonkoping University in Sweden for 2 months.
are in sustainable development planning policies, environmental economics and industrial
My research interests are including Logistics Management, Resource and Environmental
economics.
Economics, and Business Economics.