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The impact of FinTech start-ups on incumbent retail banks’ share prices

Author

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  • Yinqiao Li

    (Erasmus University Rotterdam)

  • Renée Spigt

    (Erasmus University Rotterdam)

  • Laurens Swinkels

    (Erasmus University Rotterdam)

Abstract

Background This study aims to clarify the role of FinTech digital banking start-ups in the financial industry. We examine the impact of the funding of such start-ups on the stock returns of 47 incumbent US retail banks for 2010 to 2016. Methods To capture the importance of FinTech start-ups, we use data on both the dollar-volume of funding and number of deals. We relate these to the stock returns with panel data regression methods. Results Our results indicate a positive relationship exists between the growth in FinTech funding or deals and the contemporaneous stock returns of incumbent retail banks. Conclusions Although these results suggest complementarity between FinTech and traditional banking, we note that our results at the banking industry level are not statistically significant, and that the coefficient signs for about one-third of the banks are negative, but not statistically significant. Since the FinTech industry is young and our sample period short, we cannot rule out that our findings are spurious.

Suggested Citation

  • Yinqiao Li & Renée Spigt & Laurens Swinkels, 2017. "The impact of FinTech start-ups on incumbent retail banks’ share prices," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 3(1), pages 1-16, December.
    • Handle: RePEc:spr:fininn:v:3:y:2017:i:1:d:10.1186_s40854-017-0076-7
    DOI: 10.1186/s40854-017-0076-7
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    2. Ting Yao & Liangrong Song, 2023. "Fintech and the economic capital of Chinese commercial bank's risk: Based on theory and evidence," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 2109-2123, April.
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    8. Santiago Carbó-Valverde & Pedro J. Cuadros-Solas & Francisco Rodríguez-Fernández, 2022. "Entrepreneurial, institutional and financial strategies for FinTech profitability," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 8(1), pages 1-36, December.
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    11. Christian Haddad & Lars Hornuf, 2021. "The Impact of Fintech Startups on Financial Institutions' Performance and Default Risk," CESifo Working Paper Series 9050, CESifo.
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    13. Md. Morshadul Hasan & Lu Yajuan & Appel Mahmud, 2020. "Regional Development of China’s Inclusive Finance Through Financial Technology," SAGE Open, , vol. 10(1), pages 21582440199, February.
    14. Doina Caragea & Theodor Cojoianu & Mihai Dobri & Andreas Hoepner & Oana Peia & Davide Romelli, 2024. "Competition and Innovation in the Financial Sector: Evidence from the Rise of FinTech Start-ups," Journal of Financial Services Research, Springer;Western Finance Association, vol. 65(1), pages 103-140, February.
    15. Małgorzata Hałasik-Kozajda & Martyna Olbryś, 2020. "Analiza ewolucji i struktury sektora fintech," Bank i Kredyt, Narodowy Bank Polski, vol. 51(5), pages 549-586.
    16. Cevik, Nuket Kırcı & Cevik, Emrah I. & Destek, Mehmet Akif & Bugan, Mehmet Fatih & Manga, Müge, 2024. "Unleashing power of financial technologies on mineral productivity in G-20 countries," Resources Policy, Elsevier, vol. 90(C).
    17. Zhuang Liu & Xingyi Li & Zhongfei Li, 2024. "Inclusive FinTech, open banking, and bank performance: evidence from China," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-24, December.
    18. Tang, Mengxuan & Hu, Yang & Corbet, Shaen & Hou, Yang (Greg) & Oxley, Les, 2024. "Fintech, bank diversification and liquidity: Evidence from China," Research in International Business and Finance, Elsevier, vol. 67(PA).
    19. Bianco, Simone & Zach, Florian J. & Liu, Anyu, 2022. "Early and late-stage startup funding in hospitality: Effects on incumbents' market value," Annals of Tourism Research, Elsevier, vol. 95(C).
    20. Elena Ochirova & Mikhail Miriakov, 2025. "The effect of fintech M&As on short-term stock return in the context of macroeconomic environment," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 11(1), pages 1-18, December.
    21. PINSHI, Christian P., 2021. "Exploring the usefulness of Fintech in the dark era of COVID-19," MPRA Paper 107863, University Library of Munich, Germany.
    22. Iyad Yousef Dalbah, 2020. "Management of Financial Technology and Its Impact on the Banking Services: Palestine," Business and Management Research, Business and Management Research, Sciedu Press, vol. 9(2), pages 9-18, June.
    23. Loutfi, Ahmad Amine, 2022. "A framework for evaluating the business deployability of digital footprint based models for consumer credit," Journal of Business Research, Elsevier, vol. 152(C), pages 473-486.
    24. Marwa Rabe Mohamed Ali Elkmash, 2022. "The Impact of Financial Technology on Banking Sector: Evidence from Egypt," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 12(1), pages 100-118.
    25. Chang, Vincent Y.L., 2023. "Do InsurTech startups disrupt the insurance industry?," Finance Research Letters, Elsevier, vol. 57(C).

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