Can Fintech Foster Competition in the Banking System in Latin America and the Caribbean?

40 Pages Posted: 4 Feb 2022

See all articles by Suchanan Tambunlertchai

Suchanan Tambunlertchai

International Monetary Fund (IMF)

Pablo Bejar

International Monetary Fund (IMF)

Kotaro Ishi

International Monetary Fund (IMF)

Takuji Komatsuzaki

International Monetary Fund (IMF)

Ippei Shibata

International Monetary Fund (IMF)

Jasmin Sin

International Monetary Fund (IMF)

Date Written: April 1, 2021

Abstract

This paper revisits the competitive environment of the banking system in Latin America and the Caribbean (LAC) and investigates the early impact of fintech development in the region thus far. Against the backdrop of high net interest margins (NIMs) and limited financial depth in the region, panel regressions broadly confirm results of existing literature on the association of NIMs with the changes in the financial sector structure, including market concentration, administrative costs, and foreign banks, although differences between domestic and foreign banks narrowed after the 2008-09 Global Financial Crisis. Difference-in-difference regressions and case studies on Brazil and Mexico suggest that fintech is associated with a reduction in NIMs and defensive responses by incumbent banks that benefit consumers. The case studies also shed light on regulatory approaches and prudential considerations in fostering financial innovation and banking sector competition.

Keywords: banking sector competition, panel regression, net interest margins, market share, r p rotec tio n, Fintech, Commercial banks, Foreign banks, Competition, Real interest rates, Caribbean, Global

JEL Classification: F31, E26, E42, G21, G10, E43, G01

Suggested Citation

Tambunlertchai, Suchanan and Bejar, Pablo and Ishi, Kotaro and Komatsuzaki, Takuji and Shibata, Ippei and Sin, Jasmin, Can Fintech Foster Competition in the Banking System in Latin America and the Caribbean? (April 1, 2021). IMF Working Paper No. 2021/114, Available at SSRN: https://ssrn.com/abstract=4026289

Suchanan Tambunlertchai (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Pablo Bejar

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Kotaro Ishi

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Takuji Komatsuzaki

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Ippei Shibata

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Jasmin Sin

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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