Determinants of system emergence at the nexus of banks and fintech–insights from the DACH region

We explore the determinants affecting the emergence of the “pervaded banking system” (PBS) – a mixed system encompassing traditional banks and continuously entering fintech companies – in Austria, Germany, and Switzerland. Drawing on a sample of 604 fintech companies and 802 banks, we compile an unbalanced panel dataset between 2015 and 2019 and employ a fixed-effects negative binomial model to analyze tie formation processes between fintech companies and banks using three analytical perspectives: (i) geographical colocation, (ii) network embeddedness, and (iii) combined effects. Our empirical results demonstrate that geographical factors, network-related drivers, and combined effects positively impact the formation of ties between banks and fintech companies. This study contributes to the debate in small business literature by illuminating how small firms affect system emergence. We make recommendations for bank and fintech managers, as well as political decision-makers, who need a profound systemic understanding to adapt strategies and set the institutional framework.