Can Fintech Foster Competition in the Banking System in Latin America and the Caribbean?

Ishi, Kotaro; Komatsuzaki, Takuji; Shibata, Ippei; Tambunlertchai, Suchanan; Sin, Jasmin

doi:10.5089/9781513573823.001

Cited by 7 publications

(3 citation statements)

References 11 publications

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“…There is not just interbank competition but also the banks are seeing the emergence of new competition from growing NBFCs (Prakash et al, 2022) and innovative FinTech companies (Suprun et al, 2020), which are reshaping the financial industry (Tambunlertchai et al, 2021). From providing flexible interest rate to easy access to loans, NBFCs are performing similar functions as that of banks, except that all NBFCs do not have the approval of accepting deposits (RBI Act).…”

Section: Nonbanking Financial Companies and Fintech Companiesmentioning

confidence: 99%

Impact of bank competition on financial stability-a study on Indian banks

Verma

Chakarwarty²

2023

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Purpose Nowadays, the competition is not only emerging from within the banking sector, but nonbanking companies like nonbanking financial companies (NBFCs) and FinTech are also growing in size and numbers, offering innovative financial products and services, giving a stiff competition to Indian banks. Thus, this study aims to investigate whether competition from within and outside the banking sector enhances or reduces the financial stability of the banking industry. Design/methodology/approach The study uses Herfindahl–Hirschman index to measure market share and Z score to measure financial stability. The study further examines the role of NBFCs and FinTech companies in impacting the financial stability by introducing variables like innovation, cybercrimes, systemically important institutions, etc. Thereafter, panel regression has been applied. Findings Empirical results show a positive relation of market share with financial stability, implying that increased competition in the Indian banking industry erodes the market power, adversely affecting the profit margins which encourages banks to take more risk and which may impact financial stability. The study shows a positive impact of innovation on financial stability which implies that the competition is acting as an enabler for banks. The authors find a negative relation of systemic important NBFCs with financial stability. The authors observe a negative association of cybercrimes with financial stability, reflecting that competition emerging from FinTech sector has exposed banks to new risks. Research limitations/implications The policymakers should make sure that the competition of banks with other financial institutions, such as FinTech sector, remains healthy; otherwise, it can jeopardize the entire financial system. It is for the policymakers to define a boundary for FinTech sector, as the development of this sector has exposed the banking industry to new kinds of risks potential to create financial instability. The banks should do a comprehensive check on the company to which it is granting loans, and the government should amend laws. Though big banks have huge potential, consolidations can pose challenges at a macroeconomic level. Originality/value FinTech firms are a new entrant in the financial world which are providing immense competition to the banking sector, and thus radically changing the entire financial system. Therefore, it is extremely vital to study and explore the role of NBFCs and the FinTech industry as the main variable to analyze bank competition, which to the best of the authors’ knowledge is completely missing in the previous studies.

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Section: Nonbanking Financial Companies and Fintech Companiesmentioning

confidence: 99%

Impact of bank competition on financial stability-a study on Indian banks

Verma

Chakarwarty²

2023

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“…Broad scope exists to rationalise and unify the numerous tax exemptions and special tax regimes, and thus broaden the tax base. This would significantly simplify the tax system, reduce the scope for tax evasion and allow lower tax rates (OECD, 2013 [100]). Besides the positive fiscal impact, creating a level playing field for all firms and sectors would improve the allocation of scarce domestic resources and increase competition, innovation and productivity (Chapter 4).…”

Section: Fiscal Consolidation Is Necessary To Stabilise Public Debt A...mentioning

confidence: 99%

“…The enhancements for minority investors and corporate governance were acknowledged by the Doing Business 2019 report. In this respect, the Dominican Republic managed to climb 13 positions in the Minority Investor Protection indicator (Superintendencia del Mercado de Valores, 2018 [100]). The law also promoted the use of centralised systems of compensation and liquidation of orders, improving price formation and liquidity.…”

Section: A New Securities Law Was Passed To Improve Minority Investor...mentioning

confidence: 99%

Crime and insecurity: Perception and current trends in the Dominican Republic

2022

Multi-Dimensional Review of the Dominican Republic

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The well-being of citizens is driven by multiple, interrelated dimensions. In fact, policy makers are required to reconcile economic, social and environmental objectives to ensure that their country's development path is inclusive and sustainable and that the lives of its citizens improve. This involves looking at development from a comprehensive perspective, taking into account complementarities and trade-offs across policies.Multi-dimensional Country Reviews (MDCRs) of the OECD Development Centre build on the above-mentioned ideas. They seek to analyse the main constraints to inclusive and sustainable development in a country from a multi-dimensional perspective. They also provide policy recommendations and aim to support the design of well-sequenced strategies for reform. This is the first time that the Dominican Republic has benefited from a review of this kind. Others have been, or are being, conducted in Latin America and the Caribbean -including in Ecuador, El Salvador, Panama, Paraguay, Peru and Uruguay -as well as in other regions. The methodology is based on quantitative economic analysis, as well as qualitative approaches including foresight and participatory workshops that bring together the private and public sectors, civil society and academia. This review seeks to support the Dominican Republic at a time when it is recovering from the impact of the COVID-19 pandemic and striving to build a more inclusive and sustainable development model. The global context also poses important challenges, mainly the impact of Russia's war against Ukraine, high inflationary pressures at the international level, and the acceleration of global megatrends like the digital transformation or the green transition.The report is structured in two main parts. Part I, the Initial Assessment, evaluates where the country stands in the various dimensions of Agenda 2030. Part II provides an In-Depth Evaluation of three critical areas for the development of the Dominican Republic: i) creating better jobs; ii) mobilising more financial resources to support development; and iii) embracing the digital transformation. In each of these areas, the Review provides policy recommendations to move from analysis to action, as implementation is a fundamental part of policy making, and one where well-designed policies often fail.

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Interest rates as a finance battleground? The rise of Fintech and big tech credit providers and bank interest margin

Hodula

2023

Finance Research Letters

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Can Fintech Foster Competition in the Banking System in Latin America and the Caribbean?

Cited by 7 publications

References 11 publications

Impact of bank competition on financial stability-a study on Indian banks

Impact of bank competition on financial stability-a study on Indian banks

Crime and insecurity: Perception and current trends in the Dominican Republic

Interest rates as a finance battleground? The rise of Fintech and big tech credit providers and bank interest margin

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