How Do Banks Interact with Fintech Startups?

CESifo Working Paper Series No. 7170

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

41 Pages Posted: 23 Jan 2020

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: January 17, 2020

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. Many banks tackle the challenges of digitalization by cooperating with startup firms that offer technology-driven financial services (fintechs). In this paper, we examine which banks typically collaborate with fintechs, how intensely they do so, and which form of alliance they prefer. Using hand-collected data covering the largest banks from Canada, France, Germany, and the United Kingdom, we provide detailed evidence on the different forms of alliances occurring in practice. 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. Moreover, in line with incomplete contract theory, we find that banks more frequently invest in small fintechs but often build product-related collaborations with larger fintechs.

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 Fintech Startups? (January 17, 2020). 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 )

Avenue Willy Brandt
Euralille, 59777
France

HOME PAGE: http://sites.google.com/view/armin-schwienbacher

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
737
Abstract Views
2,580
rank
36,094
PlumX Metrics