Does FinTech Compete with or Complement Bank Finance?

38 Pages Posted: 3 Jan 2019 Last revised: 5 Sep 2019

See all articles by Rebel A. Cole

Rebel A. Cole

Florida Atlantic University

Douglas J. Cumming

Florida Atlantic University; Birmingham Business School; European Corporate Governance Institute (ECGI)

Jon Taylor

Federal Reserve Banks - Federal Reserve Bank of St. Louis

Date Written: August 31, 2019

Abstract

We consider comprehensive data on crowdfunding in the U.S., including debt (marketplace lending), rewards, donations, and equity crowdfunding, to formally test for the first time if banks are complements or substitutes to crowdfunding. The data indicate that bank failures in a county are associated with a reduction in debt and rewards crowdfunding, and total crowdfunding (including donations and rewards as well, however, bank failures are statistically unrelated to those types of crowdfunding in our empirical setting). The data are consistent with bank failures being associated with a reduction in the aggregate number of entrepreneurs in a county, while the remaining entrepreneurs seeking crowdfunding are less reliant on external debt finance in their county. Overall, the data indicate crowdfunding and traditional bank finance are complements.

Keywords: Banks, Bank Loans, Bank Failure, Crowdfunding, FinTech

JEL Classification: G21, G23, G24, G28, G33, G38

Suggested Citation

Cole, Rebel A. and Cumming, Douglas J. and Taylor, Jon, Does FinTech Compete with or Complement Bank Finance? (August 31, 2019). Available at SSRN: https://ssrn.com/abstract=3302975 or http://dx.doi.org/10.2139/ssrn.3302975

Rebel A. Cole

Florida Atlantic University ( email )

College of Business
777 Glades Road
Boca Raton, FL 33431
United States
1-561-297-4969 (Phone)

HOME PAGE: http://rebelcole.com

Douglas J. Cumming (Contact Author)

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://sites.google.com/view/douglascumming/bio?authuser=0

Birmingham Business School ( email )

Edgbaston Park Road
Birmingham, B15 2TY
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://https://ecgi.global/users/douglas-cumming

Jon Taylor

Federal Reserve Banks - Federal Reserve Bank of St. Louis ( email )

411 Locust St
Saint Louis, MO 63011
United States

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