Abstract
Financial technology companies (fintechs) have gained tremendous importance in the last decade and particularly in the last four years. They have contributed with disruptive technological solutions and provided not only complementary but also substitute products to the traditional banking sector. New incumbents have been challenging banks already established and forced them to innovate in order to remain competitive. Indeed, banks have a heavy burden of slow processes, costly business models, and few innovative solutions. The authors collected 100 articles from Scopus related with the fintech and bank topics. This study adopted a hybrid design comprising a systematic qualitative review methods and narrative, supplemented by semantic network analysis. Based on the results of the systematic literature review, the authors explored the impacts that fintechs have had on traditional banking sector.
TopIntroduction
New concepts of fintechs have appeared and became interesting due to the reputational challenge posed to traditional banking caused by the subprime crisis. Consumers have questioned the strategy of financial industry and the impacts it has had on the world economy (Dell’Atti, Trotta, Iannuzzi, & Demaria, 2017). Fintech companies have real impacts because their technological solutions are being broadly adopted in banking or retail being blockchain a case study even for cyber security (Kshetri, 2017). Fintechs impact the traditional banking system because they challenge the existent business model and provide much more technological solutions characterized by lower prices and higher accessibility. Fintech is a fast-growing sector with high potential and may be considered a disruption on the current state of technology. Consumers are adopting these services due to their advantages which constitute solutions for the future of banking and several other industries. Nonetheless, the risks associated with this new industry should also be considered. The current risks that fintech companies pose may affect consumers, companies and the entire financial stability (KPMG, 2019) because currently fintech offer a diverse range of services which can be a plain current account but also virtual investments in fiat or digital currencies (Brochado, 2018a). The examples are the Initial Coin Offerings (ICOs) which are an alternative investment form offering the possibility of direct financing from investors worldwide (Brochado, 2018b) and contributing to the democratization of entrepreneurship and access to capital markets (Chen, 2018).
The aim of this chapter is to study fintech developments and in particular the impacts they have had in shaping traditional banking business models recently challenged (Roland Berger, 2018). This paper aims at answering the following research question: What insights does current literature offer regarding the impact of fintechs in the banking sector?
The structure of this chapter is as follows: (i) next section offers a descriptive analysis of the impact of fintechs and digital solutions in banking; (ii) the methodology describes the approach used to collect the papers under analysis and the content analysis approach; (iii) the results section includes a descriptive, narrative and semantic analysis (iv) the chapter ends with conclusions and the avenues for future research.
Key Terms in this Chapter
Altcoins: These refer to alternative coins to bitcoin. They surged after the bitcoin and are based on the same technology.
Investment: In this chapter, investment means the amount invested in Fintech companies via several strategies, namely, venture capital or mergers and acquisitions (M&A).
RegTech: Technological company specialized in the offer of new technological solutions in order to meet regulatory requirements.
P2P: Peer to peer activities are used to avoid intermediaries in the process because lender and borrower match without the need of an intermediary bank.
Financial Institution: Every company which engages in businesses which deal with financial or monetary transactions. Banks are included into this category as well as financial intermediaries or wealth managers.
Fintech: Technological company providing financial services which are complementary and most times substitutes to the ones offered by traditional banking sector. These companies are characterized by its high investment in new digitalized business models.
Market Volume: Market volume refers to the total amount of transactions concluded in a determined period, for instance, the transactions amount which Fintech concluded in a specified market for a determined period.
Cryptocurrency: Virtual currency not controlled by a central authority and which constitutes a digital asset. These currencies work usually through a blockchain technology.