Fintech and banking: What do we know?

There is currently no consensus about what the term Fintech means. This paper explores the complexity of Fintech, and attempts a definition, drawn from a process of reviewing more than 200 scholarly articles referencing the term Fintech and covering a period of more than 40 years. The objective of this study is to offer a definition which is distinct as well as succinct in its communication, yet sufficiently broad in its range of application. As the origins of the term can neither be unequivocally placed in academia nor in practice, the definition concentrates on extracting out the quintessence of Fintech using both spheres. Applying semantic analysis and building on the commonalities of 13 peer-reviewed definitions of the term, it is concluded that Fintech is a new financial industry that applies technology to improve financial activities. The implications as well as the shortcomings of this definition are discussed.

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Taming the Beast: A Scientific Definition of Fintech

FinTech and RegTech : impact on regulators and banks

Along with the development of Fintech, many scholars have studied how information technology is applied to financial services with a focus on extended methods for application. Few scholars have studied the influence mechanism behind the adoption of Fintech services. This paper proposes an improved technology acceptance model (TAM) that incorporates user innovativeness, government support, brand image, and perceived risk as determinants of trust to investigate how users adopt Fintech services. We designed a questionnaire, sent it to active customers of the Hefei Science and Technology Rural Commercial Bank, and obtained 387 eligible responses. We analyzed the data with a structural equation model (SEM) to test the hypotheses, including the relationships of all latent variables. The results reveal that users’ trust in Fintech services has a very significant influence on users’ attitudes for adoption. In addition, perceived ease of use and perceived risk does not affect users’ attitudes toward the adoption regarding Fintech services. This study contributes to the literature of the adoption of Fintech services by providing a more comprehensive view of the determinants of users’ attitudes by combining trust of Fintech services with TAM.

Adoption Intention of Fintech Services for Bank Users: An Empirical Examination with an Extended Technology Acceptance Model

Dear readers, This preface introduces the special issue on FinTech in Electronic Markets. The issue includes a total of eight papers, which cover diverse aspects in the broad FinTech universe. Seven papers emerged from the special issue call that was published in 2016 and one paper from a fast-track that was organized with the Business Information Systems Conference (BIS) from 2016. Taken alone, the number of submissions for the FinTech special issue call was larger than for regular special issues in Electronic Markets, which might suggest that FinTech is an active research field. This is remarkable since the term itself has only recently gained broad attention. For example, a simple query on Google Trends reveals that it was only in 2014 that the compound term BFinTech^ emerged on a broad scale and made the transformation of the financial industry visible to everybody (Arner et al. 2016). An industry that had remained rather stable over decades was apparently confronted all of a sudden with new market participants and the acceleration of digital innovation. A surge in the foundation of new companies (Bstart-ups^) occurred, which promised to change the entire industry with some even claiming that this will be the beginning of the end of banks. This would confirm statements from the 1990s whereby Bbanking is essential, banks are not^ or whereby Bbanks are the steel industry of the [nineteen]nineties^ (Beck 2001, p. 7). Some 25 years later, we may see the beginning of this (digital) transformation. Although the financial industry as a whole and many of the traditional players from the world of Bbig banks^ exist, the BFinTech^ movement has substantially influenced this sector.

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FinTech and the transformation of the financial industry

“FinTech”, a contraction of “Financial technology”, refers to technology enabled financial solutions. It is often seen today as the new marriage of financial services and information technology. However, the interlinkage of finance and technology has a long history and has evolved over three distinct eras, during which finance and technology have evolved together: first in the analogue context then with a process of digitalization of finance from the late twentieth century onwards. Since 2008, a new era of FinTech has emerged in both the developed and developing world. This era is defined not by the financial products or services delivered but by who delivers them and the application of rapidly developing technology at the retail and wholesale levels. This latest evolution of FinTech, led by start-ups, poses challenges for regulators and market participants alike, particularly in balancing the potential benefits of innovation with the possible risks of new approaches. We analyse the evolution of FinTech over the past 150 years, and on the basis of this analysis, argue against its too-early or rigid regulation at this juncture.

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The Evolution of FinTech: A New Post-Crisis Paradigm?

The COVID-19 coronavirus crisis is putting unprecedented strain on markets, governments, businesses and individuals. The human, economic and financial costs are increasing dramatically, with potentially huge impact on developing countries and emerging market countries in addition to developed countries and regions. Across all of these, the greatest toll is likely to fall on those least able to bear it, with terrible damage to human development across the world.

This paper examines how the digital financial infrastructure that emerged in the wake of the 2008 Global Financial Crisis is being, and can be, leveraged to overcome the immediate challenges presented by the pandemic and manage the impending economic fallout. 

The origins of the 2008 crisis and current crisis are different: 2008 was a financial crisis spilling over into the real economy. 2020 is a health and geopolitical crisis, spilling over simultaneously into financial markets and the real economy. As such, this crisis requires different approaches.

This study operates at two levels: 

• At the macro level, it seeks to identify areas of systemic risk and strategies and frameworks to support policy coordination and action; and 

• At the micro level is seeks to illustrate how digital finance tools may be able to assist addressing some of the challenges emerging.

Strategies to address financial aspects of the crisis in order to reduce the economic and human impact include: (1) ensuring sufficient liquidity to support market functioning and underpin demand; (2) intensifying information exchange on health and financial / economic matters in an effort to ensure accurate information despite forces that work against this; (3) heavy, temporary financial support for individuals; for small, medium and large enterprises to avoid loss of infrastructure and preserve the capacity for an orchestrated response (by avoiding mass insolvency); and potentially, in some cases, for governments; (4) leveraging digital finance and payments to reduce human-to-human contact, while organizing support for the elderly and other digitally excluded people who would normally use physical channels; (5) establishing a well-funded coordination body as a crisis management tool to ensure information exchange; (6) directing financial resources to medical infrastructure; and (7) directing financial resources to digital infrastructure and connectivity to support all other aspects of society and the economy, including, especially, the online facilitation of education and widespread work-from-home policies.

At the same time, the digitization of financial services in the last decade offers alternative and more direct means by which it may be possible to stimulate the real economy, which will be critical in mitigating the economic impacts and maintaining social cohesion. Tools that support financial inclusion, sustainable development and achievement of the UN Sustainable Development Goals can also provide useful tools during a crisis. 

These short term strategies are expected to generate deeper structural changes long-term. For now, one cannot predict the new world that will emerge post crisis, but this issue will require focussed attention going forward as the immediate situation eventually comes under control and recovery begins.

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Digital Finance & The COVID-19 Crisis

In July 2015, China’s peer-to-peer (P2P) lending platforms counted 2,136, with settlements of about RMB82.5 billion transactions in that single month, making it the country with the most P2P platforms in the world. As the sector went from one platform in 2007 to more than an estimated 2,000 platforms currently, the P2P sector went from too-small-to-care to too-big-to-fail, attracting a new level of regulatory scrutiny. Ultimately, this systemic shift offers China a regulatory and market reform opportunity with profound consequences for the country and the developing world. Indeed, the Internet Finance Guidelines released in July 2015 indicate that the country is creating both a financial market infrastructure and a regulatory framework that is built with financial technology (FinTech) in mind.

Jnje Barberis

Papers

The Evolution of FinTech: A New Post-Crisis Paradigm?

Digital Finance & The COVID-19 Crisis

FinTech in China: From the Shadows?