Financial Technology Spillover and Investment Behavior: Financial Literacy, Risk-Seeking, and Portfolio Choice

Technological advances and digitization have reshaped how investors access financial services, yet it remains unclear whether these services substitute for traditional financial channels or instead encourage broader market participation. We theorize digital finance as a gateway infrastructure that reduces participation frictions, supports experiential learning, and induces behavioral migration into adjacent financial channels. Using data from the China Household Finance Survey and a staggered-adoption difference-in-differences design with inverse probability weighting, we examine how digital finance adoption affects investors’ participation in traditional financial markets and the risky-asset share of their portfolios. We find that adoption increases both outcomes, with effects that are largest at the time of adoption and that attenuate but remain positive thereafter. Mechanism analyses suggest that these patterns are consistent with improved financial literacy and a greater willingness to take financial risk. Additional tests indicate that the effects operate primarily on the extensive margin: digital finance brings previously inactive investors into traditional markets and helps existing participants remain engaged, rather than reallocating assets within incumbent investors’ existing portfolios. Our approach addresses concerns about endogenous treatment, with instrumented difference-in-differences as an additional robustness check. The study shows how fintech can complement incumbent channels and reshape user behavior beyond the focal platform service, offering managerial insights into the design and development of platform-mediated financial services, as well as implications for regulatory policy.

Recommended citation: Pengyu Wang, Jinwei Zhang, and Mingwen Yang. (2026). "Financial Technology Spillover and Investment Behavior: Financial Literacy, Risk-Seeking, and Portfolio Choice." Working paper.
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