Each quarter we feature articles and commentary on a range of issues We use a sample of both Islamic and conventional banks from Malaysia for the 20032018 period. A Bull Market Is Coming: Here's Warren Buffett's Life-Changing Investing Advice, Join Over Half a Million Premium Members And Get More In-Depth Stock Guidance and Research, Copyright, Trademark and Patent Information. (1996). PubMedGoogle Scholar. Financ. Table 7 presents the results of the alternative measures of financial stability. [8] investigated the value of FinTech innovations using patent-filling data from 20032017. \(X\) indicates bank-level financial control variables, and \(M\) represents industry- and macro-level control variables (as defined in Sect. Predictive role of online investor sentiment for cryptocurrency market: Evidence from happiness and fears. IATSS Res. Bus. Frankel: They made billions of dollars of loans without a banking charter. Specifically, we use bank size measured as the logarithm of total assets. Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. El impacto de las fintech en el sector bancario | Novicap Innov. 24(47), 4765 (2019), Hosen, M., Thaker, H.M.T., Vasanthan, S., Eaw, H.C., Cham, T.H. Rev. Take that with a grain of salt, he's somewhat biased. Financ. As a follow-up to the initial study, the Cambridge Centre for Alternative Finance at the University of Cambridge Judge Business School, the World Bank Group and the World Economic Forum have jointly published the Global COVID-19 Fintech Market Impact & Industry Resilience Study. 9(2), 4366 (2020), Cho, T.Y., Chen, Y.S. The Journal of Law and Economics, 16, 19. We begin our preliminary investigation by presenting descriptive statistics for the variables in Table 1. J. This study fills this research gap. Does board structure in banks really affect their performance? Making informed decisions Payment partnerships actively work to reduce risk, which is one of their key advantages. Table 1 further suggests that FinTech measures exhibit higher standard deviations, as the number of these firms varies considerably across the sample period. Juga menurunkan kinerja telepon pintar karena banyak data yang harus disimpan. With the five biggest banks controlling nearly half of the industrys $15 trillion in assets, FinTechs $12.4 billion in venture investments this year look like peanuts. However, FinTech firms influence is greater on the financial stability of small banks than on that of large banks. Use the Previous and Next buttons to navigate the slides or the slide controller buttons at the end to navigate through each slide. Austr. Socio. Ban yak Blockchain can impact financial services [8], who argue that financial institutions can avoid the negative impact of competitor innovations by investing heavily in their own innovations. This change has been brought about by the advent of fintech. RMIT University, School of Economics, Finance and Marketing, Melbourne, Australia, School of Business, University of Dundee, Dundee, UK, You can also search for this author in I think those responses missed the point of Mikes proof-of-concept. The Impact For Payments While acquisitions have long been commonplace for the payments industry, the challenges of the current economic climate are driving The Review of Financial Studies, 32, 19001938. The statistics suggest that the Z-score ranges from0.20 to 2.66 in the sample, which implies that financial stability varies significantly among the selected sample banks. WebWe found that the fintech score had a significant and negative relationship with bank performance across both bank types (IBs and CBs). Therefore, this study aimed to address this research question. The Impact Of Payment Partnerships On The E-Commerce Landscape. The stochastic stability frontier model and translog specification for the stochastic stability frontier model are specified as follows: where \(\ln Z - score_{it}\) is the logarithm of the Z-score for bank i in year t, \({y}_{g}\) refers to \(g\) th output, and \({w}_{m}\) is \(m\) th input price. Our results show that the development of FinTech firms over time increases bank financial stability. Fintech Li, J., Li, J., Zhu, X., Yao, Y., & Casu, B. Lagna, A., Ravishankar, M.N. Global Bus. by The Fintech Times May 29, 2023. WebIn June 2019, the OECD discused to what degree digital disruption from FinTech and BigTech could impair financial market stability and thus, whether players in these markets need a different type of regulatory oversight. 292318). Competition and bank stability. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Overall, these descriptive statistics suggest significant variation in the sample observations. Thakor, A. V. (2020). Does financial technology matter? Evidence from an alternative 63, 101398 (2020), Lee, C.C., Li, X., Yu, C.H., Zhao, J.: Does fintech innovation improve bank efficiency? Phan, D. H. B., Narayan, P. K., Rahman, R. E., & Hutabarat, A. R. (2020). I mean, my parents bought a house in 2009, had no trouble getting a mortgage. North Am. FinTech firms have received increasing attention in recent years owing to their rapid development and expansion across economies. However, the authors reported that FinTech development not only enhances the use of technology by the banks but also improves their cost efficiency. (1995). Frankel: It was a negligible amount in 2010, just 10 years ago, 10 years before the end of last year. of Financial Technology in Banking Industry Fintech Membawa Dampak Positif atau Negative? Safiullah, M., & Shamsuddin, A. Using annual aggregate data from the World Bank in 2001-2020 and econometric (2020). From Bogot to banking, Alex Jimenez has navigated a journey of innovation and resilience, leaving a lasting impact on the financial services industry, from Fintech to Digital Marketing. Finally, despite Malaysia's significant growth in FinTech and dual-banking systems, there has been scant prior research on FinTech and banking. International Review of Economics & Finance, 73, 496514. J. Monet. 72(2), 357384 (2004), Disyatat, P.: The bank lending channel revisited. J. Econ. This is despite the challenging context for governments facing high inflation, fiscal pressures, and The use of lagged values helps reduce the concern of reverse causality and permits our variable of interest some time lag to affect bank financial stability. Theres no such thing as an average day. Provided by the Springer Nature SharedIt content-sharing initiative, Over 10 million scientific documents at your fingertips, Not logged in Our contributions to the literature are threefold: First, this study is the first to examine FinTech firms impact on bank financial stability. Evidently, although the literature on FinTech has been growing recently, it is still sparse.Footnote 3. Buchak, G., Matvos, G., Piskorski, T., & Seru, A. Deutsche Bank Research, 2(1), 3965. [16], the Z-score, price of deposits \(({w}_{1})\), and price of physical capital \(({w}_{2})\) are normalized by the price of labor (\({w}_{3}\)). Impact The question of whether the financial sector and the economy would not suffer from the incursions of FinTech, is not unreasonable. Further, it is a prominent country with a dual-banking system that comprises Islamic as well as conventional banks [47]. 51, 100842 (2021), Cheng, M., Qu, Y.L: Does bank FinTech reduce credit risk? The results are robust to alternative model specifications, measures of financial stability, and FinTech. Using a review methodology, this paper finds that, Fintech has potential to influence the realization of increase in financial development and economic growth, only when appropriate regulation is put in place. Do financial technology firms influence bank performance? https://doi.org/10.1007/s12599-017-0464-6, Acar, O., tak, Y.: E: Fintech integration process suggestion for banks. Financ. The remainder of this paper is organized as follows: Sect. Given this argument, we posit that increasing competition in the financial sectordue to FinTech firms rapid growthmay lower the banks profits from lending, thereby adversely affecting their share prices. During a time like that, who was loaning money to consumers? (2019). Second, the present study is also the first to investigate this impact in the context of both Islamic and conventional banks. Google Scholar, Appiah-Otoo, I., Song, N.: The impact of Fintech on poverty reduction: Evidence from China. - 173.236.222.27. It also makes it harder for us to see the night sky. Karena dari forum berbagi diantara peserta, masing-masing negara dapat mempelajari sisi negatif dan positif perkembangan teknologi finansial. A number of companies in the sector are competing for market share and have prioritised growth and customer acquisition over profitability. This indicates that Islamic banks are more efficient in adopting FinTech technologies in their services and in managing the competition arising from FinTech firms. Anyone you share the following link with will be able to read this content: Sorry, a shareable link is not currently available for this article. Digital Disruption in Banking and its Impact on The EY organization has announced that 966 people have been promoted to partner across the globe, reflecting continued growth and strong business performance by the organization. Inf. International Monetary Fund. The fintech opportunity(No. Islamic banking: Issues in prudential regulations and supervision. WebAdapun dampak negatif fintech di sini adalah tentunya memperberat kerja telepon pintar. Eng. (2023). Universiti Teknologi Malaysia, Johor, Malaysia, The British University in Dubai, Dubai, United Arab Emirates, Al-Buraimi University College, Al Buraimi, Oman, 2023 The Author(s), under exclusive license to Springer Nature Switzerland AG, Hosen, M., Cham, TH., Eaw, HC., Subramaniam, V., Thaker, H.M.T. The empirical results are presented in Table 10. Goetz, M. R. (2018). The promise of FinTechsomething new under the sun. Sustainability 11(22), 6434 (2019), Narayan, S.W. 3(3) (2015), Lu, L.: Promoting SME finance in the context of the fintech revolution: A case study of the UKs practice and regulation. Frontiers | How does climate risk matter for corporate green [28], Sheng [44], Chen et al. Journal of Corporate Finance, 55, 105140. Rev. \(FinTech\) refers to three proxies for FinTech firms (i.e., the number of all FinTech firms that are closely related and not related to the banking industry). Table 5 presents the results of FinTech companies impact on the financial stability of Islamic and conventional banks. Global FinTech Adoption Index. 48(1), 123133 (2010), Friedline, T., Naraharisetti, S., Weaver, A.: Digital redlining: Poor rural communities access to fintech and implications for financial inclusion. In the payments industry, partnerships have played a crucial role in driving innovation and progress. Ia berpandangan, Their analysis showed that most FinTech innovations offer substantial value to innovators. Finally, we suggest that future studies may try investigating COVID-19s impact on banks financial stability as well as FinTech firms growth. The highest correlation between ROA and financial stability is 0.28. Safiullah, M., Paramati, S.R. Evidence from China. The variable GFC is a dummy variable that is equal to one for the GFC period (20072009)Footnote 6 and zero if otherwise. To empirically investigate the above models, we begin our analysis by applying the POLS method. This has caused disruption in traditional banking and finance sector of the economy. Future studies may also examine FinTech firms impact on both banking and non-banking firms, thereby further enhancing our understanding of FinTech and its wider impact. He absolutely should. This can have various negative impacts on both humans and wildlife. The theory of bank risk taking and competition revisited. 130(3), 453483 (2018), Nakashima, T.: Creating credit by making use of mobility with FinTech and IoT. 32(5), 16471661 (2019), Dranev, Y., Frolova, K., Ochirova, E.: The impact of fintech M&A on stock returns. Second, we believe that this topic is important and worth empirically examining because the FinTech market is growing rapidly, and the banking industry is under market pressure to adopt sophisticated financial technologies in their transactions and services. International Review of Economics & Finance, 74, 468483. : Artificial Intelligence (AI), Blockchain, Cryptocurrency in finance: Current scenario and future direction. Each quarter we feature articles and commentary on a range of issues affecting the Fintech sector with input from specialists across the firm. Digital disruption in financial markets The selection of the GFC period is based on previous literature (e.g., [37]. Stud. Journal of Banking & Finance, 37, 15731589. The Motley Fool owns shares of and recommends PayPal Holdings and Square. The use of lagged values of FinTech variables resolves this impact in relation to the time period. Let's take PayPal, for example. How do reputation, structure design and FinTech ecosystem affect the net cash inflow of P2P lending platforms? Financ. The POLS technique enables us to obtain an overview of the nature of the relationship between dependent and independent variables. Errico, M. L., & Farahbaksh, M. M. (1998). Pacific-Basin Finance Journal, 68, 101587. However, amid the flourishing digital commerce landscape, there is a concerning knowledge gap among merchants regarding Finally, \({u}_{it}\) is a nonnegative random variable, representing stability inefficiency. If you think about a lot of these fintechs, you look at Square, you look at PayPal. To empirically test the assertion that FinTech firms impact bank stability, we employ the following regression model: where i and t refer to the bank and year, respectively. FinTech on the brink of further disruption. Dimon views this as a negative trend To estimate the stability frontier model in Eq. Further, bank age represents the number of years from the year of establishment to the end of 2018; the non-performing loans (NPL) ratio is the ratio of NPL to gross loans; equity capital ratio is the ratio of equity capital to total assets; assets growth is the annual growth rate of total assets; income diversity is the ratio of non-interest income to total operating income; ROA is the return on assets; bank concentration ratio is the assets of the three largest banks as a percentage of total banking industry assets; GDP growth rate is the annual growth rate of per capita GDP in percentage and bank-level corporate governance score; the governance score is the average of eight bank-level board of directors attributesnamely, board size, board independence, CEO duality, board busyness, board members financial expertise, audit committee size, audit committee chairman independence, and risk management committee size. Evidence from Chinas banking industry. This concern drives our interest in exploring whether the competition arising from the FinTech market equally affects bank stabilityirrespective of the level of bank corporate governance. Jurnal Manajemen Bisnis 8(2), 268275 (2021), Zaghlol, A.K., Ramdhan, N.A., Othman, N.: The nexus between FinTech adoption and financial development in Malaysia: An overview. J. Financ. Economics Letters, 208, 110068. We therefore see blockchain as a promising technology to resolve significant problems in the banking and finance sector that have been for many years impeding the industry (Nasscom, 2020). This paper investigates the impact of climate risk on corporate green innovation in Chinese heavy-polluting listed companies from 2011 to 2020. 74, 468483 (2021), Jnger, M., Mietzner, M.: Banking goes digital: The adoption of FinTech services by German households. Moser: I think you make a really good point there. Nonetheless, FinTech firms may impose indirect pressure on banks to either adopt FinTech as part of their own services or engage FinTech service providers in their services, which may help banks operate efficiently, maintain profitability, and thereby remain financially stable. (2021). Karim, S., Naeem, M. A., Mirza, N., & Paule-Vianez, J. 3(4), 192203 (2013), Safitri, T.A. Specifically, we argue that large banks are not as quick as small banks in implementing appropriate actions to improve their financial stability. The Journal of Risk Finance., 23, 191. Lit. We further include GFC in our baseline model to investigate whether FinTech firms impact on bank financial stability holds, controlling for the GFC. : Does fintech matter for Indonesias economic growth? The ongoing Journal of econometrics, 68, 2951. Alternatively, due to the increasing presence of FinTech firms in the financial system, banks may be forced to adopt FinTech services in their banking business, which may eventually help them operate efficiently and maintain their customer base and revenues, thereby maintaining their financial stability. EY announces 966 new partner promotions worldwide Bank Market. Laeven, L., & Levine, R. (2009). European Business Organization Law Review, 19, 6392. How Fintech is powering the global economy. The impact of the FinTech revolution on the future of Policy Summary Executive Summaries of All Technical Notes 34, 101260 (2020), Li, B., Xu, Z.: Insights into financial technology (FinTech): A bibliometric and visual study. Soc. Huang [23] and Milne and Parboteeah [32]Footnote 2 documented that the P2P lending platform does not merely work as an intermediary to pull funds from retail investors and lend money to individual borrowers and small and medium-sized enterprises (SMEs); instead, it offers other value-added services, including checking the solvency of borrowers and loan ratings, managing payments, and providing investment advice to clients. Notably, non-interest income (income diversity) is nearly 20% on average, which is a good sign indicating that banks are able to generate income from sources other than traditional banking services. Google Scholar, Legowo, M.B., Subanidja, S., Sorongan, F.A. Frankel: Basically, he pointed out that over the past 10 to 20 years, fintech has just become such a disruptive force in the financial industry. Frankel: The traditional banking system, especially large banks, it uses more stable sources of credit. Financ. Square, like you said, until they actually got their bank charter, that was a little bit of a different animal altogether. Int. We find evidence that FinTech firms positively impact bank financial stability. Carney, M. (2017). 40(23), 168181 (2016), Adu, G., Marbuah, G., Mensah, J.T. Therefore, multicollinearity is not a problem in this estimation. This note reviews the financial stability implications for banks and the financial system of fintechs engaging in payment and lending activities. How Big of a Threat Is Fintech to the Banking Industry? 97(3), 319338 (2010), Broni, M.Y., Hosen, M., Mohammed, H.N., Tiamiyu, G.: Should banks be averse to elections? Econ. Journal of Econometrics, 87, 115143. Manage. Fintech is Changing the Future of Banking | University of Bath Financial Stability Board (2019). Karim, S., Lucey, B. M., Naeem, M. A., & Uddin, G. S. (2022). We examine both the contemporaneous and lagged effects of FinTech on banks financial stability. FinTech 24, 459467 (2021), Rosyadah, K., Budiandriani, B., Hasrat, T.: The role of Fintech: Financial inclusion in MSMEs (case study in Makassar City). Emerg. This dual benefit is more clearly observed in instances of market-supported service innovations. Will JPMorgan Chase Raise Its Dividend This Year? Taken together, this research expands our knowledge base on FinTech firms impactand their differential impact between bank types on bank financial stability. The impact of FinTech firms on bank financial stability, \({\text{Z - score}}_{{i,t}} = \left[ {{\text{ROA}}_{{i,t}} + {\text{CAR}}_{{i,t}} /{\text{SDROA}}_{{i,t}} } \right]\), $$In(Z{\text{ }} - {\text{ }}score_{{it}} ) = Inf_{t} \left( {X_{{it}} } \right) + v_{{it}} + u_{{it}}$$, $$\left( {\frac{{Z{\text{ }} - {\text{ }}score_{{it}} }}{{w_{3} }}} \right) = \alpha _{0} + \sum\limits_{{g = 1}}^{3} {\alpha _{g} } \ln (y_{{git}} ) + \sum\limits_{{m = 1}}^{2} {\beta _{m} } \ln \left( {\frac{{w_{{mit}} }}{{w_{3} }}} \right) + \frac{1}{2}\sum\limits_{{g = 1}}^{3} {\sum\limits_{{h = 1}}^{3} {\gamma _{{gh}} } } \ln \left( {y_{{git}} } \right)\ln \left( {y_{{hit}} } \right) + \frac{1}{2}\sum\limits_{{m = 1}}^{2} {\sum\limits_{{n = 1}}^{2} {\delta _{{mn}} } } \ln \left( {\frac{{w_{{mit}} }}{{w_{3} }}} \right)\ln \left( {\frac{{w_{{nit}} }}{{w_{3} }}} \right) + {\text{ }}\sum\limits_{{g = 1}}^{3} {\sum\limits_{{m = 1}}^{2} {\theta _{{gm}} } } \ln (y_{{git}} )\ln \left( {\frac{{w_{{mit}} }}{{w_{3} }}} \right) + v_{{jit}} + u_{{jit}}$$, \({SE}_{it}=E({e}^{{-u}_{it}}|{\varepsilon }_{it}\), $${\text{FS}}_{it} = \alpha + \beta {\text{FinTech}}_{it} + \gamma X_{it} + \delta M_{t} + \varepsilon_{it }$$, $$FS_{it} = \alpha + \beta {\text{FinTech}}_{it} + \gamma X_{it} + \delta M_{t} + \emptyset {\text{GFC}} + \varepsilon_{it }$$, https://doi.org/10.1007/s10660-022-09595-z, Capital and asset quality implications for bank resilience and performance in the light of NPLs regulation: a focus on the Texas ratio, Terrorist attacks and bank financial stability: evidence from MENA economies, The financial and prudential performance of Chinese banks and Fintech lenders in the era of digitalization, Empirical evidence on bank market power, business models, stability and performance in the emerging economies, Will fintech development increase commercial banks risk-taking?
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