Does one size fit all? Comparing the determinants of the FinTech market segments expansion

Journal of Finance and Data Science. 2023. Vol. 9. Article 100095.

Stolbov M., Shchepeleva M.

The paper aims to indentify and compare the determinants of the overall FinTech market expansion and its major segments – cryptocurrency and peer-to-peer lending markets – in a dataset, which covers 64 countries and 51 potentially relevant factors. To this end, we apply a battery of state-of-the-art variable selection techniques from machine learning, comprising Bayesian model averaging (BMA), least absolute shrinkage and selection operator (LASSO), variable selection using random forests (VSURF) as well as spike-and-slab regression. We document substantial heterogeneity of the pivotal determinants across the FinTech market as a whole and its major segments. Thus, specific rather than general policy measures are needed to foster the development of standalone FinTech market segments. Moreover, our findings suggest that most countries don't need to seek a universal specialization in FinTech activities, concentrating on the segment where they have a competitive edge in terms of the pivotal determinants which drive its expansion.

Keywords: machine learning, fintech, cryptocurrency, peer-to-peer lending, variable selection