Where Did Fintechs Come from, and Where Do They Go? The Transformation of the Financial Industry in Germany after Digitalization

25 Pages Posted: 18 Sep 2017

See all articles by Barbara Brandl

Barbara Brandl

University of Jena

Lars Hornuf

University of Bremen - Faculty of Business Studies and Economics; Max Planck Institute for Innovation and Competition; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: September 13, 2017

Abstract

The digitalization of financial services opened a window for new players in the financial industry. These start-ups take on tasks and functions previously reserved for banks, such as lending, payments, or investment. In this article, we trace the transformation of the industry after digitalization. By using data on FinTech formations in Germany, we show that entrepreneurial dynamics in the FinTech sector are not so much driven by technology as by the educational and business background of the founders. Furthermore, we investigate the reactions of traditional banks to the emergence of these start-ups. In contrast with other emerging industries such as biotechnology, a network analysis shows that FinTechs have mostly engaged in strategic partnerships and only a few banks have acquired or obtained a financial interest in a FinTech. We explain the restraint of banks to fully endorse the new possibilities of digitalized financial services with the characteristics of the technology itself and with the postponed fundamental decisions of banks to modernize their IT infrastructure.

Keywords: FinTech, Founders, Financial industry, IT infrastructure

JEL Classification: L86, M13, O32

Suggested Citation

Brandl, Barbara and Hornuf, Lars, Where Did Fintechs Come from, and Where Do They Go? The Transformation of the Financial Industry in Germany after Digitalization (September 13, 2017). Available at SSRN: https://ssrn.com/abstract=3036555 or http://dx.doi.org/10.2139/ssrn.3036555

Barbara Brandl (Contact Author)

University of Jena ( email )

Furstengraben 1
Jena, Thuringa 07743
Germany

Lars Hornuf

University of Bremen - Faculty of Business Studies and Economics ( email )

Bremen, D-28359
Germany
+49 89 20348619 (Phone)

HOME PAGE: http://www.hornuf.com

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, Bayern 80539
Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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