THE FINTECH FIRMS DURING COVID-19: THE ROLE OF TAIL RISK AND SYSTEMIC RISK

Abstract

The primary purpose of this study is to investigate the relationship between tail risk and systemic risk in financial technology (Fintech) companies. The study also analyzes the role of the tail and systemic risk in Fintech firms during the COVID-19 outbreak. The exponential increase in digital users of financial applications demonstrates the tremendous growth of the Fintech industry during COVID-19. Thus, the analysis of the association between tail risk, systemic risk, and Fintech is conducted on a deluxe sample of Fintech companies. From December 2019 to February 2022, the data of Fintech enterprises is compiled. The extreme value theory serves as the theoretical lens for determining the tail risk of based Fintech companies. The lower value of technology companies suggests a long tail for Fintech companies. The thicker tail suggests that Fintech firms grew dramatically throughout the COVID-19 timeframe. Few firms in our sample have the fattest tail, indicating that these enterprises were highly exposed to risk during COVID-19. Furthermore, the data indicate that the systemic risk of Fintech firms during COVID-19 depends on the global technology index. The likely explanation for these results is that during COVID-19, Fintech firms' clients grew faster than customers in other industries. During the COVID-19 epidemic, Fintech firms have raised their tails. This study is among the first and will aid regulators, financial professionals, and researchers in gaining a better grasp of the challenges surrounding tail risk and systemic risk in Fintech companies.