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Entrepreneurial, institutional and financial strategies for FinTech profitability

Author

Listed:
  • Santiago Carbó-Valverde

    (University of Granada
    Funcas)

  • Pedro J. Cuadros-Solas

    (CUNEF Universidad
    Funcas)

  • Francisco Rodríguez-Fernández

    (University of Granada
    Funcas)

Abstract

Notwithstanding the emergence of FinTech startups in the financial services industry, most of these companies face significant difficulties in breaking even and surviving. This study examines the main managerial, institutional, and financial drivers of FinTech profitability and the time it takes for these firms to break even. The database includes relevant qualitative factors, such as foundational characteristics, the technological profile of the startup, and its funding structure. Using the full population of FinTech startups operating in Spain from 2005 to 2017, we observe that most of these firms are unprofitable within three years of their inception. Combining panel data and survival analyses, we empirically find that large and solvent FinTech firms founded by single entrepreneurs in an incubator or accelerator program are more likely to be profitable and prevail. FinTech firms reach their break-even points faster if they receive funding through seed capital.

Suggested Citation

  • 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.
    • Handle: RePEc:spr:fininn:v:8:y:2022:i:1:d:10.1186_s40854-021-00325-2
    DOI: 10.1186/s40854-021-00325-2
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    More about this item

    Keywords

    FinTech; Profitability; Entrepreneurship; Technology; Financial strategies; Startups;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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