The (Unfulfilled) Fintech Potential

1 Notre Dame J. Emerging Tech, 352 (2020)

63 Pages Posted: 6 Feb 2019 Last revised: 18 Jun 2020

See all articles by Aluma Zernik

Aluma Zernik

Harvard University, Law School

Date Written: October 1, 2018


Despite the high expectations of technology to come to consumers’ aid, detailed by academics, technological experts, and government officials, the largest Fintech companies that impact consumers' financial choices have made only limited progress in resolving market failures that are derived from consumers’ bounded rationality, information, and attention. Analyzing the design of leading credit card comparison websites, financial management tools, and mobile wallets, the paper demonstrates that notwithstanding the significant benefits of such products, they don't fulfill the potential ascribed to them. Even though the relevant technologies and information are available, Fintech intermediaries simply don’t take on such roles, the solutions envisioned aren't coming into fruition, and in some cases, the design of these products even exacerbates existing market failures. There are several possible explanations for why such services, despite their potential benefits, aren’t appearing as significant participants in financial markets. First and foremost, just as bounded rationality distorts consumers’ demand for financial products, it also limits their ability to demand products that help them overcome those same biases. Second, consumers prefer to receive free services, which often entail lowering the quality of the services they receive, while forcing companies to profit from back-end services. When companies design their services as a two-sided platform, they under-price the services offered to consumers, often providing them for free, while transferring such costs to other participants on the platform, such as retail businesses or credit card companies, which may lead to conflicting interests. Finally, such services may be impacted by the power and influence of existing incumbents, specifically banks and credit card networks. Despite these challenges, there are several ways that markets can develop to fulfill the potential for enhanced products that resolve behavioral market failures. Policy interventions that look to antitrust and competition considerations, as well as the imposition of existing fiduciary duties or regulations promoting fairness and prohibiting misleading practices, can go a long way in driving out certain problematic practices. Additionally, market actors whose interests are aligned with those of consumers, such as employers and wealth managers, can help create the market demand needed to fund services that fulfill the Fintech potential.

Keywords: Fintech, Law and Economics, Consumer Finance, Credit, Banking, Technology

JEL Classification: D1, D14, D18, D4, D61, D81, D82, D83, D9, G02, G21, G22, K00, M13, O16, O3, O33

Suggested Citation

Zernik, Aluma, The (Unfulfilled) Fintech Potential (October 1, 2018). 1 Notre Dame J. Emerging Tech, 352 (2020), Available at SSRN: or

Aluma Zernik (Contact Author)

Harvard University, Law School ( email )

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Cambridge, MA 02138
United States

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