The emergence of the global fintech market: economic and technological determinants

Haddad, Christian; Hornuf, Lars

doi:10.1007/s11187-018-9991-x

Cited by 424 publications

(208 citation statements)

References 37 publications

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“…A greater adoption of digital products and services will ensure greater market prospects for fintechs. Second, the term fintech covers the entire scope of services and products traditionally provided by the financial services industry (Haddad & Hornuf, 2016). It comprises several areas such as finance and investment, operations and risk management, payments and infrastructure, data security and monetization, and customer interface.…”

Section: Alternative Explanations and Future Researchmentioning

confidence: 99%

“…This extension is not trivial, as we are able to examine whether enforcement of financial regulation can spur investment activity into startups, as well as whether or not and how the VC cycle can seemingly and surprisingly repeat itself despite repeated boom and bust cycles. An exception is the work by Haddad and Hornuf (2016), who examine economic and technological determinants of fintech startups, without, however, examining the investment cycle nor the impact of the recent financial crisis. This paper is organized as follows.…”

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confidence: 99%

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Fintech venture capital

Cumming

Schwienbacher

2018

Corporate Governance

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Manuscript Type Empirical Research Question/Issue Where are fintech venture capital investments taking place around the world? What is the role of institutional factors on the international allocation of fintech venture capital? Research Findings/Insights We document a notable change in the pattern of fintech venture capital (VC) investments around the world relative to other types of investments after the global financial crisis. We show that fintech venture capital investments are relatively more common in countries with weaker regulatory enforcement and without a major financial center after the financial crisis. Also, we show the fintech boom is more pronounced for smaller private limited partnership venture capitalists that likely have less experience with prior venture capital booms and busts. These fintech VC deals are substantially more likely to be liquidated, especially when located in countries without a major financial center. Theoretical/Academic Implications We build on the institutions and corporate governance literatures by showing the importance of enforcement in driving relative differences in investment patterns and investor participation. For entrepreneurial startups, regulatory arbitrage drives investment into countries with a dearth of enforcement and regulatory costs. We argue that the spike in fintech venture capital in certain countries is attributable to differential enforcement of financial institution rules amongst startups versus large established financial institutions after the financial crisis. Practitioner/Policy Implications Regulatory arbitrage in the context of fintech venture capital can spur booms and busts. Less experienced venture capitalists seem more prone to undertake investments that exacerbate boom and bust cycles. National governance is strengthened by the enforcement of regulatory standards, and corporate governance through investor experience and oversight can mitigate these swings, and facilitate better investment outcomes.

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Section: Alternative Explanations and Future Researchmentioning

confidence: 99%

mentioning

confidence: 99%

Fintech venture capital

Cumming

Schwienbacher

2018

Corporate Governance

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“…Thus, digital disruption has a twofold potential either to diminish the role and relevance of banks or to help them create better, more flexible and valuable services that could make them an even more important part of everyday life of their customers (Skan et al 2015). Haddad and Hornuf (2016) identify several areas that prior research has recently addressed in the field on fintech, including crowdlending, different types of crowdfunding, social trading platforms, robo-advisors, virtual currencies (e.g. Bitcoin or Ethereum), mobile payment and e-wallet services and venture capitalist investments in fintech start-ups.…”

Section: Service Network In Banking Industrymentioning

confidence: 99%

End-customer value restructuring the financial service supply chain

Komulainen

Saraniemi

Ulkuniemi

et al. 2018

MIP

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Purpose The purpose of this paper is to examine how the customer value experience conveys the restructuring of the service network in the banking industry. The banking sector has often been one of the early adopters of IT in terms of connecting their services and customers. While developing digital services, however, banks are also concerned that they are losing contact with their customers. At the same time, fast developing technologies enable new companies to enter the industry to offer their services. As a result, the service supply chains in the banking industry appear to be restructured. Design/methodology/approach The empirical data were collected by using a qualitative method of focus groups and interviews with end-users of banking services. Findings According to findings, customers value a holistic approach to the services, and such a holistic value cannot necessarily be provided by a single banking service provider because the ecosystem around such services is becoming more complex. Practical implications Service supply chains need to be restructured based on the end-customer value experience. Originality/value This study contributes to value research and especially to the discussion in service experiences by addressing some of the disruptions happening at the industry level. The paper shows that the focus should be on customer value because banks should understand that their services are not enough for the customers—they are only seen as banks, not as providers of the holistic value that is required from the customer’s point of view.

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“…De Nederlandsche Bank (2016) focuses on the impact of Fintechs on banks operating in The Netherlands. Investments in Fintechs has been increasing over the years (Haddad and Hornuf, 2016), highlighting the growth of the Fintech market. Europe in particular is experiencing a continued rise in the number of and investments in Fintechs (CB Insights, 2016).…”

Section: Introductionmentioning

confidence: 99%

Strategic risk, banks, and Basel III: estimating economic capital requirements

Chockalingam

Dabadghao

Soetekouw

2018

JRF

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Purpose -Basel III regulations require banks to protect themselves against strategic risk. This paper aims to provide a comprehensive and measurable definition of this risk and proposes a framework to estimate economic capital requirements.Design/methodology/approach -The paper studies the literature and solicits expert opinion in formulating a comprehensive and measurable definition of strategic risk. The paper postulates that the economic capital for a bank's strategic risk should be estimated using the cost of equity as the profitability threshold, rather than zero and develops a simulation-based framework to estimate economic capital.Findings -The framework closely matches the actual economic capital outlay for strategic risk from our case study of ABN AMRO. It is shown that a bank's strategic growth plans can fall into one of two scenarios based on risk-return characteristics. In one scenario, the required economic capital outlay will increase, and decrease in the other.Practical implications -This framework is generalizable and makes use of widely accepted and used practices in banks, making it readily implementable in practice. It does not introduce errors resulting from model selection, parameterizations or complex calculations.Social implications -Society would be worse off in the absence of banking and lending services. Banks need to take risks to grow and stay competitive. The framework facilitates better strategic risk management, protecting banks from collapse and reducing the need for taxpayer-funded bailouts.Originality/value -The paper provides a measurable and practitioner-verified definition of strategic risk and proposes a simple framework to estimate economic capital requirements, a crucial topic, given the threats and increased levels of strategic risk facing banks.

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The emergence of the global fintech market: economic and technological determinants

Cited by 424 publications

References 37 publications

Fintech venture capital

Fintech venture capital

End-customer value restructuring the financial service supply chain

Strategic risk, banks, and Basel III: estimating economic capital requirements

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