The Effect of FinTech on the Financial Institution in Six ASEAN Countries: Fama-French Five-Factor Asset Pricing Model Approach

Abstract

This study aimed to address the varying effects of FinTech growth across six ASEAN countries as the result of geographical heterogeneity of the FinTech start-ups. We examined both the supply and demand drivers to the growth of the FinTech start-ups on the stock returns of 70 incumbent banks across six ASEAN countries from 2012 to 2018. Annual data of the supply drivers such as dollar-funding volume, number of deals and number of FinTech companies were created, and the demand drivers such as internet banking population, alternative financial service providers and unbanked population, were regressed against the incumbents’ stock returns with panel data analysis. The findings indicate that the relationships between the FinTech growth and incumbents’ stock returns in Singapore and Philippine are positive while there is insignificant negative relationship to the incumbents in Indonesia and insignificant positive relationship to the incumbents in Vietnam. FinTech growth in Malaysia and Thailand were found to have no effect on the incumbents’ stock return. These results vary across respective geographical areas in ASEAN countries due to the distinctive fundamental settings of the FinTech adoption and FinTech investment in response by the consumers and suppliers of funds contributing to the FinTech growth.