Does Mobile Payment Adoption Reduce Corruption? Cross-country Evidence

Different from the commonly envisioned benefit of digital payment in reducing corruption, we show, in a difference-in-differences analysis of mobile payment adoption in 198 jurisdictions, that mobile payment adoption increases corruption in the short run (up to three years from the adoption), and then such increase dissipates over time. The effects are concentrated in jurisdictions that have a higher level of corruption before the adoption, are developing markets, or follow a civil-law legal system. Our results can be explained by (lax) regulation on mobile payment that often lags behind FinTech innovations at the early stage of such innovations. Our study shows a potential dark side of FinTech and highlights the importance of timely regulation to achieve the intended effectiveness of digital payment in reducing corruption