Are Fintech Firms Ready for Industry 5.0? The Influence of Cybercrime on the Dynamics of Volatility and Herding Behavior Among Investors

Industry 5.0 has shown a new approach to integrating enterprises, particularly fintech firms. It would be interesting to see whether we are ready to implement Industry 5.0 across domains and enterprises while there are still obstacles to overcome, such as cybercrime impacting fintech organizations. Using empirical analysis of the fintech stocks that make up the KBW index, the author uncovered the influence of cybercrime on investor herding behavior in a highly interdependent environment provided by Industry 4.0. The cross-sectional standard deviation has been shown to rise after a cyber attack on a company anywhere on the globe. Furthermore, the author established the long-term equilibrium of the volatilities of gold and bitcoin returns, as well as the volatility of Keefe, Bruyette, and Woods (KBW) returns, in the sample after the firms’ cyber assault using Vector Auto Regressive (VAR) and Vector error correction model (VECM) models. Following the cyber assault, there is a decrease in the volatility of KBW returns while the volatility of bitcoin returns rises, suggesting a volatility transfer from one market to the other. These results show that during times of crisis, investors should be more careful in their approach to investment diversification, and any Industry 5.0 implementations should be done with the constraints in mind.