How Do Banks Interact with Fintechs? Forms of Alliances and their Impact on Bank Value

CESifo Working Paper Series No. 7170

Best Paper Award 1st International FinTech, InsurTech & Blockchain Forum

39 Pages Posted: 1 Oct 2018

See all articles by Lars Hornuf

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)

Milan Klus

University of Münster

Todor Lohwasser

University of Münster

Armin Schwienbacher

SKEMA Business School

Date Written: August 02, 2018

Abstract

The increasing pervasiveness of technology-driven firms that offer banking services has led to a growing pressure on traditional banks to modernize their core business activities. Banks attempt to confront the challenges of digitalization by cooperating with financial technology firms (fintechs) in various forms. In this paper, we investigate the factors that drive banks to form alliances with fintechs. Furthermore, we analyze whether such bank-fintech alliances affect the market valuation of banks. We provide descriptive evidence on the different forms of alliances occurring in practice. Using hand-collected data covering the largest banks from Canada, France, Germany, and the United Kingdom, we show that banks are significantly more likely to form alliances with fintechs when they pursue a well-defined digital strategy and/or employ a Chief Digital Officer. We evidence that markets react more strongly if digital banks rather than traditional banks announce a bank-fintech alliance. Finally, we find that alliances are most often characterized by a product-related collaboration between the bank and the fintech and that banks most often cooperate with fintechs providing payment services.

Keywords: fintech, strategic alliance, entrepreneurial finance, financial institutions, banks

JEL Classification: G210, G230, G340, M130

Suggested Citation

Hornuf, Lars and Klus, Milan and Lohwasser, Todor and Schwienbacher, Armin, How Do Banks Interact with Fintechs? Forms of Alliances and their Impact on Bank Value (August 02, 2018). CESifo Working Paper Series No. 7170. Available at SSRN: https://ssrn.com/abstract=3252318

Lars Hornuf (Contact Author)

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

Milan Klus

University of Münster ( email )

Germany

Todor Lohwasser

University of Münster ( email )

Germany

Armin Schwienbacher

SKEMA Business School ( email )

Lille
France

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