What's Your Bank's Fintech Score? Technology Integration into Banking and the Broker Business Model

67 Pages Posted: 8 Jan 2021 Last revised: 12 Apr 2024

See all articles by Linda Allen

Linda Allen

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance

Yu Shan

Syracuse University - Whitman School of Management

Yi Tang

Fordham University - Gabelli School of Business

Alev Yildirim

CUNY Queens College

Date Written: March 23, 2023

Abstract

We define Fintech as the intersection between banks' technology integration and the broker business model. Unlike traditional dealer banks relying on leveraged balance sheets for intermediation, Fintech banks adopt a technology-driven broker model. Using nonlinear and machine learning algorithms, we develop an empirical "Fintech score" that shows on-balance sheet lending for low Fintech score banks versus securitization, brokered deposits, and non-interest income for high score banks. Using two complementary measures of operational efficiency, we find that this technology-driven shift in business models (either holistically or via mergers) reduces the cost of financial intermediation.

Keywords: Fintech, operational efficiency, broker, dealer, market making, match making, AI, IT

JEL Classification: G20, G21, G23, G24

Suggested Citation

Allen, Linda and Shan, Yu and Tang, Yi and Yildirim, Alev, What's Your Bank's Fintech Score? Technology Integration into Banking and the Broker Business Model (March 23, 2023). Available at SSRN: https://ssrn.com/abstract=3703840 or http://dx.doi.org/10.2139/ssrn.3703840

Linda Allen (Contact Author)

City University of New York, Baruch College - Zicklin School of Business - Department of Economics and Finance ( email )

17 Lexington Avenue
New York, NY 10010
United States
646-312-3463 (Phone)
646-312-3451 (Fax)

HOME PAGE: http://stern.nyu.edu/~lallen

Yu Shan

Syracuse University - Whitman School of Management ( email )

721 University Avenue
Syracuse, NY 13244-2130
United States

Yi Tang

Fordham University - Gabelli School of Business ( email )

113 West 60th Street
New York, NY 10023
United States

Alev Yildirim

CUNY Queens College ( email )

Flushing, NY 11367
United States

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