Assessing the risks of fintech development: the case of online illegal capital raising
Abstract
This study examines the impact of financial technology (FinTech) on online illegal capital raising (ICR) in China. Using a large dataset of court judgments from China Judgment Online from 2014 to 2019, we observe a steady increase in the number and proportion of defendants involved in online ICR cases. Our empirical analysis shows that FinTech contributes significantly to the increase in online ICR, particularly in regions with low opportunity costs of crime and limited access to traditional financial services. The findings remain robust to different FinTech proxies, sample adjustments, and considerations of potential endogeneity. Weak regulatory oversight and higher potential criminal returns are key channels through which FinTech promotes online ICR. These findings highlight the need for stronger financial regulation, especially in high-risk regions, alongside efforts to improve public awareness of online investment risks. Strengthening regulation while promoting the positive role of FinTech in financial development is critical to mitigating emerging financial risks.
First published online 15 April 2025
Keyword : FinTech, online illegal capital raising, financial regulation, crime rate
How to Cite
Zhang, X., Shi, J., Zhao, J., & Wu, X. (2025). Assessing the risks of fintech development: the case of online illegal capital raising. Technological and Economic Development of Economy, 1-29. https://doi.org/10.3846/tede.2025.23390
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Jagtiani, J., & John, K. (2018). Fintech: The impact on consumers and regulatory responses. Journal of Economics and Business, 100, 1–6. https://doi.org/10.1016/j.jeconbus.2018.11.002
Jagtiani, J., & Lemieux, C. (2019). The roles of alternative data and machine learning in fintech lending: Evidence from the LendingClub consumer platform. Financial Management, 48(4), 1009–1029. https://doi.org/10.1111/fima.12295
Jain, J., & Ohalehi, P. (2018). Why people fall prey to Ponzi schemes: An analysis of attitudes, behaviours, demographics and motivations of victims in India. SSRN. https://doi.org/10.2139/ssrn.3263995
James Dow, & Werlang, S. R. da C. (1992). Uncertainty aversion, risk aversion, and the optimal choice of portfolio. Econometrica, 60(1), 197–204. https://doi.org/10.2307/2951685
Jamil, A. H., Mohd Sanusi, Z., Yaacob, N. M., Mat Isa, Y., & Tarjo, T. (2022). The COVID-19 impact on financial crime and regulatory compliance in Malaysia. Journal of Financial Crime, 29(2), 491–505. https://doi.org/10.1108/JFC-05-2021-0107
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Karpoff, J. M. (2021). The future of financial fraud. Journal of Corporate Finance, 66, Article 101694. https://doi.org/10.1016/j.jcorpfin.2020.101694
Kubilay, E., Raiber, E., Spantig, L., Cahlíková, J., & Kaaria, L. (2023). Can you spot a scam? Measuring and improving scam identification ability. Journal of Development Economics, 165, Article 103147. https://doi.org/10.1016/j.jdeveco.2023.103147
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