The past decade has witnessed a phenomenal rise of digital wallets, and the COVID-19 pandemic further accelerated their adoption globally. Such e-wallets provide not only a conduit to external bank accounts but also internal payment options, including the ever-popular Buy-Now-Pay-Later (BNPL). We examine, for the first time, e-wallet transactions matched with merchant and consumer information from a world-leading provider based in China, with around one billion users globally and a business model that other e-wallet providers quickly converge to. We document that internal payment options, especially BNPL, dominate both online and on-site transactions. BNPL has greatly expanded credit access at the extensive margin through its adoption in two-sided payment markets. While BNPL crowds out other e-wallet payment options, it expands FinTech credit to underserved consumers. Exploiting a randomized experiment, we also find that e-wallet credit through BNPL substantially boosts consumer spending. Nevertheless, users, especially those relying on e-wallets as their sole credit source, carefully moderate borrowing when incurring interest charges. The insights likely prove informative for economies transitioning from cash-heavy to cashless societies where digital payments and FinTech credit see the largest growth and market potential.

This paper evaluates the impact of mobile cashless payment on credit provision to the underprivileged. Using a representative sample of Alipay users that contained detailed information about their activities in consumption, credit, investment, and digital footprints, I exploit a natural experiment to identify the real effects of cashless payment adoption. In this natural experiment, the staggered placement of Alipay-bundled shared bikes across different Chinese cities brings exogenous variations to the payment flow, allowing me to address the endogeneity issues and establish a causal relationship. I find that the use of in-person payment in a month increases the likelihood of getting access to credit in the same month by 56.3%. Conditional on having credit access, a 1% increase in the in-person payment flow leads to a 0.41% increase in the credit line. Those having higher in-person payment flow also use their credit lines more. Importantly, the positive effect of in-person payment flow on credit provision mainly exists for the less educated and the older, suggesting that cashless payment particularly benefits those who are traditionally underserved.