FinTech, BigTech, and the Future of Banks

Fisher College of Business Working Paper No. 2019-03-020

Charles A. Dice Center Working Paper No. 2019-20

26 Pages Posted: 19 Sep 2019

See all articles by René M. Stulz

René M. Stulz

Ohio State University (OSU) - Department of Finance; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Date Written: September 16, 2019

Abstract

Banks are unique in that they combine the production of liquid claims with loans. They can replicate most of what FinTech firms can do, but FinTech firms benefit from an uneven playing field in that they are less regulated than banks. The uneven playing field enables non-bank FinTech firms to challenge banks for specific products whose success is not tied to what makes banks unique, but they cannot replace banks as such. In contrast, BigTech firms have unique advantages that banks cannot easily replicate and therefore present a much stronger challenge to established banks in consumer finance and loans to small firms. Both Fintech and BigTech are contributing to a secular trend of banks losing their comparative advantage as they have less access to unique information about parties seeking credit.

Keywords: FinTech, BigTech, bank, blockchain, diversification discount, big data, digital

JEL Classification: G21, G23, G24, G28, G51

Suggested Citation

Stulz, Rene M., FinTech, BigTech, and the Future of Banks (September 16, 2019). Fisher College of Business Working Paper No. 2019-03-020. Available at SSRN: https://ssrn.com/abstract=3455297 or http://dx.doi.org/10.2139/ssrn.3455297

Rene M. Stulz (Contact Author)

Ohio State University (OSU) - Department of Finance ( email )

2100 Neil Avenue
Columbus, OH 43210-1144
United States

HOME PAGE: http://www.cob.ohio-state.edu/fin/faculty/stulz

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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