Digital Finance and the Changing Patterns of Crime 

PI: Dr. Zhuang Liu, HKU
Co-I: Prof. Yan Shen, Peking University

Project Abstract: 

This study combines detailed data on digital finance (from Alipay) and comprehensive data on crime in China to investigate the relation between FinTech and the changing patterns of crime. In theory, the development of digital finance can bring significant changes to the pattern of crime because, first, the change in payment methods – from cash to e-payments and mobile payments – has significantly increased the costs and reduced the payoff of property crime. Second, digital finance makes credit more accessible and inclusive, providing support for people in urgent financial need and curbing the incentive to commit crime.

By analyzing the data, we will test the following hypotheses. Hypothesis #1: The development of digital finance significantly reduces the prevalence of crime, especially crimes such as theft and robbery that involve cash as the target.

Hypothesis #2: Digital finance changes the relative proportion of different types of crime. While the ratio of many types of traditional property crimes will decrease, cybercrime will become increasingly prevalent. In the meantime, the number of homicides and other personal crimes will not be influenced by the development of digital finance.

Hypothesis #3: Digital finance has a stronger effect on crime in less developed areas, including rural areas and less developed cities.

We will also study the implications of our findings and propose policy responses.