The impact of Fintech on employment and labour productivity in the South African banking sector

Abstract

This study examines the influence of financial technology (Fintech) on labour productivity and employment in South Africa’s banking industry from 2010 Q1 to 2022 Q4, a period characterised by significant digital transformation accelerated by the COVID-19 pandemic. Employing the Autoregressive Distributed Lag (ARDL) modelling framework, the analysis estimates both short-term and long-term relationships between fintech adoption and two key economic variables: employment and labour productivity. The empirical results indicate that fintech adoption initially reduces employment levels due to automation and digital substitution; however, it positively affects employment in the long term through the creation of new roles and the expansion of service offerings. Labour productivity consistently benefits from fintech diffusion, although incremental improvements tend to decrease over time. By focusing on an emerging economy such as South Africa, this research fills a notable gap in existing literature, which has predominantly concentrated on developed countries. The findings highlight the dual role of fintech as a catalyst for efficiency and a disruptor of traditional employment frameworks. Additionally, the study advocates for balanced policy approaches that leverage the productivity gains associated with fintech while addressing its potential short-term impact on labour displacement. These conclusions offer valuable guidance to policymakers, financial institutions, and technology developers as they navigate the dynamic digital financial ecosystem in South Africa and comparable markets.