From Competitors to Partners: Banks’ Venture Investments in Fintech

62 Pages Posted: 12 Apr 2024

See all articles by Manju Puri

Manju Puri

Duke University - Fuqua School of Business; NBER

Yiming Qian

University of Connecticut - Department of Finance

Xiang Zheng

University of Connecticut - Department of Finance

Date Written: March 18, 2024

Abstract

We hypothesize and find evidence that banks use venture investments in fintech startups as a strategic approach to navigate fintech competition. We first document that banks’ venture investments have increasingly focused on fintech firms. We find that banks facing greater fintech competition are more likely to make venture investments in fintech startups. Banks target fintech firms that exhibit higher levels of asset complementarities with their own business. Finally, instrumental variable analyses show that venture investments increase the likelihood of operational collaborations and knowledge transfer between the investing bank and the fintech investee.

Keywords: Fintech, Bank, Venture Investments, Competition, Collaboration

JEL Classification: G21, G24

Suggested Citation

Puri, Manju and Qian, Yiming and Zheng, Xiang, From Competitors to Partners: Banks’ Venture Investments in Fintech (March 18, 2024). Available at SSRN: https://ssrn.com/abstract=4763371 or http://dx.doi.org/10.2139/ssrn.4763371

Manju Puri (Contact Author)

Duke University - Fuqua School of Business ( email )

100 Fuqua Drive
Box 90120
Durham, NC 27708-0120
United States
919-660-7657 (Phone)

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yiming Qian

University of Connecticut - Department of Finance ( email )

2100 Hillside Road U-1041F, Room 452
Storrs, CT 06269
United States
860-486-2774 (Phone)

Xiang Zheng

University of Connecticut - Department of Finance ( email )

School of Business
2100 Hillside Road
Storrs, CT 06269
United States

HOME PAGE: http://www.xiangzheng.info/

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