History is replete with people’s failures to anticipate the impact of technological change. Are we making the same mistake with financial technology (fintech)? Could it, in fact, be the next revolutionary technology to boost economic growth?
Financial innovations are unlike other inventions in that they can directly impact the efficiency of the financial sector, which is how savings and investment are intermediated in an economy – and which then affect growth.
Yet fintech is part of the digital economy that has produced innovations that have transformed the way we live, even as productivity growth has been slowing across advanced economies for decades. It is captured in the Solow paradox: The computer age is seen everywhere except in the productivity data.