The Fintech Disruption: How Financial Innovation Is Transforming the Banking Industry

Description

This book provides both practice-oriented and academic insights into the disruptive power of fintech for the banking industry. It explores (1) whether and how the banking industry can use newly emerging technologies in the financial sphere to its advantage while managing any associated risks, (2) how these technologies affect traditional banking service formats as well as the pricing of these services, and (3) whether the emergence of fintech in the banking industry calls for a rethinking of existing banking regulations such as the Basel Accords as well as country-specific regulations. Prior publications in this area typically examine both current applications of fintech in the banking industry, as well as its future prospects, by analyzing actual cases or exploring the impact of a single emerging technology on the banking industry. They often ignore the interdependence between emerging technologies and overlook the connection between fintech as a whole and the future of the banking industry. This book addresses this gap by providing a comprehensive overview of various fintech applications and by analyzing what they mean for the future of banking. Given the potentially disruptive power of fintech, the book will focus on the challenges banking supervisors are likely to encounter as a result of fintech’s continual ascent. It will thus encourage readers to think about and explore how to find a balance between the beneficial aspects of fintech and the challenges it creates in terms of supervision, regulation, and risk management. Preface Acknowledgments Contents Notes on Contributors List of Figures List of Tables 1 Fintech and Banking: An Overview Introduction Overview of Content Part I: Financial Technologies and Their Effect on the Banking Industry Part II: Challenges, Opportunities, and Regulations Regarding Fintech in the Banking Industry Part III: Evidence from Around the World References Part I Financial Technologies and Their Effects on the Banking Industry 2 Centralized and Decentralized Finance: Coexistence or Convergence? Introduction Centralized Finance (CeFi) and Technological Innovation CeFi—The Architecture of Our Current Financial System Finance—A Functional View Technological Innovation and CeFi—A 150-Year History Economical and Technical Introduction of DeFi DeFi—An Introduction The DeFi Hierarchical Layer Model The DeFi Layer Model Deep Dive: Protocol Layer MakerDAO—A DeFi Protocol Deep Dive The Technological Future of DeFi Comparing DeFi with CeFi A Functional Comparison Along the Value Chain Loan Origination Exchange Trading DeFi Advantages and Opportunities DeFi Disadvantages and Challenges DeFi Fault Lines DeFi and CeFi—Coexistence or Convergence? A Scenario Analysis Recent Examples of DeFi–CeFi Convergence Conclusion and Suggestions for Future Research References 3 Fintech and the Digital Transformation of the Banking Landscape Introduction Theoretical Framework Innovation and Financial Innovation Systemic Innovation Technology Diffusion Process Systemic Innovation and Digital Transformation of the Banking Landscape Diffusion of Fintech-Based Innovations and Potential Disruption/Revolution Under the Global Pandemic of COVID-19 Research Implications and Conclusions References 4 Shifting Paradigms in Banking: How New Service Concepts and Formats Enhance the Value of Financial Services Introduction An Outlook on the Future The Next Banking What Customers Want What Open Banking May Offer to Customers: From Definition to Main Features A Next Generation of Business Models: Platforms and Ecosystems for Embedding Financial Services and Develop a Contextual Banking From Disintermediation to Cooperation The Infinitive Financial Intermediation New Concepts and Formats of Services: The Case of Account Aggregation Services Present and Future Developments in Value Chains Summary and Conclusions: Next Steps Forward References 5 Competitors and Partners at the Same Time: On the Role of Fintech Companies in the Latvian Financial Market Introduction Sample and Survey Design Sample Survey Design Results Basic Characteristics and Performance Survey Results General Characteristics of the Respondents Outlook Conclusions References 6 Non-Fungible Tokens Definition and Basic Concepts Sources of Value NFTs as Financial Assets Unique Benefits of NFTs Types of NFTs Digital Art Play-to-Earn Video Games Digital Real Estate and Other Applications NFT Creation and Smart Contracts NFT Collections Non-Fungible vs Semi-Fungible Deployment of an NFT Collection Metadata and Attributes Minting and Unveiling Media Storage Alternative Blockchains and Additional Features Alternative Blockchains Additional Features Marketplaces On the Economics of NFTs Conclusion References Part II Challenges, Opportunities, and Regulations Regarding Fintech in the Banking Industry 7 Open Banking: Opportunities and Risks What Is Open Banking? Opportunities Risks and Mitigation Strategies Open Banking in Global View Europe Asia Australia Americas Conclusion Bibliography 8 The Rise of Financial Services Ecosystems: Towards Open Banking Platforms Introduction: Origin and Definition of the Open Banking Phenomenon New Actors in the Financial Services Market: Identifying TPPs and Their Activities Application Programming Interfaces (APIs) as a Technological Tool of Open Banking An Increasing Competition: How Is the Access to Financial Services Changing? A Different Approach to Complying with PSD2: Towards Open Banking Platforms Risks and Challenges of the Open Banking Phenomenon Conclusive Remarks References 9 The Cryptoassets Market in the United Kingdom: Regulatory and Legal Challenges Introduction The Developments in the Cryptoassets Market The Regulation Landscape of the Cryptoassets Market The Reasons for the Regulations What Regulations Exist Thus Far? What Is Regulated and What Is Unregulated? Regulatory and Some Legal Challenges Cybercrimes and Cryptosystems: What Is the Definition of Money Laundering? The Cryptocurrency Methods of Money Laundering Money Laundering Regulations in the UK Scope of Cryptoasset Activities The EU Perspective on Regulating Cryptoassets The Cryptocurrency Impact on the UK Banking Sector Conclusion References 10 A Preliminary Comparison of Two Ecosystems: Fintech Opportunities and Challenges for Financial Inclusion Introduction Theory: Entrepreneurial Ecosystems Method Findings An Ecosystem with Established Fintech Organizations An Ecosystem with Emergent Fintech Organizations Discussion of Research Results Conclusion References 11 Investigating Variables that Increase the Desire and Loyalty to Utilize Fintech After the COVID-19 Lockdown: A New Normal Behavior Introduction The Technology Acceptance Model Hypotheses The Impact of the COVID-19 Lockdown, Trust, Data Security and Privacy, QAS, and Perceived Usefulness Toward Fintech The Impact of Technology Literacy Skills in Multi-Groups on the Intention to Adopt Fintech Research Methodology Data Collection Procedure Development Analysis and Results Measurement Model Structural Model Multi-Group Test of Computer Literacy Skills Intention to Adopt Fintech During and Post-COVID-19 Lockdown Discussion Theoretical Implication Practical Implications Limitations and Future Research References Part III Evidence From Around the World 12 Fintech and Financial Inclusion in Developing Countries Introduction Fintech and Financial Inclusion in the Developing World What Is Financial Inclusion, and How Can Fintech Impact It? Predominant Fintechs in Developing Countries Constraints on Fintech in Developing Countries Mobile Money Adoption: A Regional Comparison Introduction to Mobile Money Empirical Overview of Mobile Money Penetration Evolution and Impacts of Mobile Money Cryptocurrency and Blockchain: Next Frontier, or a Bridge Too Far? Risks and Regulatory Implications of the Fintech Revolution in Developing Countries Conclusion and Prognoses for Internationally Inclusive Fintech References 13 The Cash Holdings of Fintechs and SMEs: Evidence from OECD Countries Introduction Theoretical Framework and Hypotheses Methodology Results Conclusion References 14 Fintech Companies in Brazil: Assessing Their Effects on Competition in the Brazilian Financial System from 2018 to 2020 Introduction Fintechs and Competition: An Overview Fintechs in Brazil: An Overview Assessing the Impacts of Fintechs on Brazilian Banks from 2018 to 2020 Final Remarks References Index