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There is currently no consensus about what the term Fintech means. This paper explores the complexity of Fintech, and attempts a definition, drawn from a process of reviewing more than 200 scholarly articles referencing the term Fintech and covering a period of more than 40 years. The objective of this study is to offer a definition which is distinct as well as succinct in its communication, yet sufficiently broad in its range of application. As the origins of the term can neither be unequivocally placed in academia nor in practice, the definition concentrates on extracting out the quintessence of Fintech using both spheres. Applying semantic analysis and building on the commonalities of 13 peer reviewed definitions of the term, it is concluded that Fintech is a new financial industry that applies technology to improve financial activities. The implications as well as the shortcomings of this definition are discussed.
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Journal of Innovation Management Schueffel
JIM 4, 4 (2016) 32-54
HANDLE: http://hdl.handle.net/10216/102610
ISSN 2183-0606
http://www.open-jim.org
http://creativecommons.org/licenses/by/3.0 32
Taming the Beast: A Scientific Definition of Fintech
Patrick Schueffel1
1 Hochschule für Wirtschaft Fribourg, Switzerland
patrick.schueffel@hefr.ch
Abstract. There is currently no consensus about what the term Fintech means.
This paper explores the complexity of Fintech, and attempts a definition, drawn
from a process of reviewing more than 200 scholarly articles referencing the term
Fintech and covering a period of more than 40 years. The objective of this study
is to offer a definition which is distinct as well as succinct in its communication,
yet sufficiently broad in its range of application. As the origins of the term can
neither be unequivocally placed in academia nor in practice, the definition
concentrates on extracting out the quintessence of Fintech using both spheres.
Applying semantic analysis and building on the commonalities of 13 peer-
reviewed definitions of the term, it is concluded that Fintech is a new financial
industry that applies technology to improve financial activities. The implications
as well as the shortcomings of this definition are discussed.
Keywords. Financial services, innovation, banking, financial institution,
technology, research, terminology.
1 Introduction
The Fintech genie is out of the bottle. According to an industry report the value of
investments in Fintech firms have grown by 75% in 2015 to USD 22.3 billion compared
to the previous year (Skan et al., 2016). In total more than USD 50 billion have been
globally invested in Fintech firms since 2010 (Skan et al., 2016). The population of
Fintech firms is estimated to be currently beyond 12’000 worldwide (Drummer et al.,
2016). What is more, the development has not peaked out and observers hailed the
disruption that Fintech will bring about (Schneider et al., 2016).
Ever since its inception Fintech has been pivotal to innovation in the financial services
industry. In their paper on the evolution of Fintech Arner et al. (2015, p.1) describe the
development of Fintech as an ongoing process during which finance and technology
have evolved together” and which led to numerous incremental and disruptive
innovations, such as Internet banking, mobile payments, crowdfunding, peer-to-peer
lending, Robo-Advisory, online identification etc. In a similar vein editors Chishti and
Barberis (2016) present an entire nexus of cases on how the marriage between finance
and technology has led to innovation in the financial services sector, let that be through
startup firms (e.g. eToro), at incumbent companies (e.g. Citi), at government level (e.g.
Israel), or through supraorganizations (e.g. SWIFT). In each of these cases Fintech has
significantly spurred innovation.
Due to its innovativeness and potentially disrupting effects on the financial services
industry (Ferreira et al., 2015), Fintech is said to have a comprehensive and lasting
impact on entire sector (Heap and Pollari, 2015). According to the industry augurs no
area of the business will be spared (Grebe et al., 2016; Gulamhuseinwala et al., 2015):
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offerings, i.e. products, services, and market segments will change. Operations,
comprising middle- and back-office client support, product servicing, and risk
management functions will be affected and so will be distribution, encompassing online
and physical channels, agents, financial advisers, and other third-parties. Furthermore,
Fintech will have its impact on customer experience, meaning the entirety of all
experiences the customer has with the service provider. Besides it will have its
implications on business economics, i.e. revenue, costs, and margins. Last but not least
the sector experts predict Fintech to alter the Industry dynamics altogether, causing
changes in the competitive structure and ecosystem of financial services (Deloitte,
2016). Moreover, no type of financial services provider will remain unscathed as
Fintech will bring change to all types of banks, asset and wealth managers, fund and
payment providers, brokers, exchanges, insurers alike (PWC, 2016). While the
attention received in academia is nowhere close to the attention which is paid by
practitioners, some scholars do perceive the phenomenon of Fintech as a fundamental
shift. Kauffman & Ma, for instance, refer to the ongoing “global fintech revolution”
(Kauffman and Ma, 2015, p.261) and so does Mackenzie when heading her article on
innovators in financial service “The Fintech revolution” (Mackenzie, 2015, p.50).
What is striking, however, is that despite the consensus on the major impact that Fintech
will have on the financial services industry, little academic literature has explored this
area (Shim and Shin, 2016). Moreover, no common definition of Fintech has yet been
derived. On the contrary, the question “what is fintech” currently ranks on place eight
on the most searched queries related to Fintech according to Google (Google, 2016b).
This result highlights the desperate need for a common understanding of the word
Fintech.
The term Fintech has been applied in various business contexts, often inconsistently
and ambiguously. No attempts have been made so far to extract a consensual meaning
of Fintech. But if Fintech is truly meant to be meaningful and comparable, then the
methodology and definitions used must be precise and uniform. Citing the works of
Jakobson (1933), Waugh remarks that “[s]cience is a dialogue, not a series of
monologues” (Waugh, 1997p. 103). Applied to the case at hand, however, this
necessitates that some agreement must be reached as to what constitutes Fintech. A
basic common understanding must be established to appreciate the nature of the
developments in banking and financial services and to create a solid foundation for
scientific research. Otherwise a meaningful conversation cannot emerge.
Apart from the scientific rationale, this paper is also motivated by the need for a
common understanding of the word Fintech by practitioners. As pointed out above, the
Fintech phenomenon has become too important and too pervasive over the past years
to be neglected, neither by managers of the financial services industry or related fields,
nor by consumers of financial services nor by policy makers. Only if there is minimal
common understanding of the term Fintech, a straightforward communication about the
topic can emerge which is as void of misunderstandings as possible. Correspondingly,
management can only then make optimal decisions if there is a certain consensus on
the subject to be decided on. As far as clients are concerned, a representative study
among German consumers recently highlighted the need for definitional education:
70% of the respondents did not know the term Fintech at all (Absatzwirtschaft, 2017).
This nescience of Fintech among consumers then raises the next question about
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economic policies in general and consumer protection in particular: How can policy
makers shape adequate rules and regulations in the interest of their constituents if there
is no common understanding on the topic?
Hence, the objective of this article is to shed light on Fintech by constructing a
definition of the term which is acceptable by academia but also firmly grounded in the
practical world. By doing so this text aims at constructing intertextual coherence (K.
Locke and Golden-Biddle, 1997) in a field which otherwise can be described as
unstructured and scattered at best.
The remainder of this paper is organized as follows. First, the background of the term
Fintech is expounded as it presents itself to us in the most recent times, but it is also put
in an epistemological context and the historical background is derived. This elaboration
on the background is followed by a methods section describing the methodology used
to attain the objectives outlined above. The results segment that follows outlines the
actual findings from surveying the literature on Fintech and conducting a semantic
analysis. The discussion segment thereafter debates the findings before the conclusion
paragraphs provides final thoughts on the research.
2 Background
According to the Google the term Fintech receives currently monthly on average
approximately 201’000 google searches worldwide (Google, 2016a). This count may
not appear to be large, especially when comparing it to the term “banking”, resp. “bank”
which currently reach more than 2.24 million search requests per month. Yet, it is rather
sizeable when comparing it with the search term “financial services” which reaches
approximately 40’500 counts globally per month (Google, 2016a). What is more
striking however, is the trend in the search popularity of the term Fintech. When
normalizing the scale between the fewest search entries and the most search request
over the past five years on a scale between 0 and 100, we can observe a significant
increase in the interest in the term Fintech. From a count near zero in 2011 it has
climbed to 100 in 2016 (Google, 2016b). Figure 1 depicts this trend.
Fig. 1 . Popularity of the search term “fintech” at Google
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Hence, the term Fintech has long past the test of popularity with the broader business
world. It has gained acceptance worldwide and is about to find its way into dictionaries.
The most authoritative source for British English, the Oxford English Dictionary, for
instance, suggests that Fintech are “Computer programs and other technology used to
support or enable banking and financial services: fintech is one of the fastest-growing
areas for venture capitalists” (Oxford English Dictionary, 2016). Another highly
popular dictionary of our times, Wikipedia suggests that “[f]inancial technology, also
known as fintech, is an economic industry composed of companies that use technology
to make financial services more efficient.” (Wikipedia, 2016a).
2.1 Epistemol ogical considerations
Yet, despite its existence in widely used lexicons the word “Fintech” has nonetheless
to be tried for meaningfulness. In science that test is typically formal logic which
commands that definitions be broad enough to capture the essential qualities of a class
of objects defined, yet narrow enough to discriminate these objects from other objects
(Copi et al., 2013). Deriving such a meaningful definition, however, requires us to
broadly understand the types of definitions existing and their purpose (Robinson,
1963).
In his work “An essay concerning human understanding” John Locke divided
definitions into two classifications: the first category comprises real or essentialist
definitions and second one includes the so called abbreviatory, nominal or verbal
definition (J. Locke, 1841). When saying a square is a 4-sided flat shape with straight
sides where all sides have equal length, and every interior angle is a right angle (90°),
it is considered to be a real or essentialist definition. By comparison when stating that
a 4-sided flat shape with straight sides where all sides have equal length, and every
interior angle is a right angle (90°) is a square, an abbreviatory, nominal or verbal
definition is provided. The latter type of definition is particularly helpful to increase
efficiency in science as they commonly replace a long expression with a shorter one. It
is acknowledged that variations exist of how philosophers used this distinction between
types of definition. Immanuel Kant, for instance, claimed that nominal definitions
“serve merely to distinguish a thing” whereas real definitions provided insight “into the
possibility of things” (Kant, 1992, p.493). According to Kant concepts of experience
could only be defined nominally whereas concepts of cognition could be defined using
real definitions. Yet, for the purpose of this paper I will stick to the classification
provided by J. Locke (1841).
Following the reasoning of Scherer (2005) on the nature of definitions I argue that we
need sound definitions for the term Fintech primarily for two reasons: First, a real
definition is a prerequisite of significant theoretical and empirical research. It is the
basis of an efficient communication with others as the “systematic scientific approach”
demands to “define central working concepts in universal, invariant, and consensual
fashion” (Scherer, 2005, p.698). Secondly, a nominal definition of the expression
Fintech is needed as a linguistic convention. Scherer pointed to this fact by stating that
“definitions cannot be proven”. Rather than that, he argued that “ [t]hey need to be
consensually considered as useful by a research community in order to guide research
make research comparable” (Scherer, 2005, p.724).
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Hence, a real definition of the term Fintech is especially important to the community
of scholars in order to apply a systematic scientific approach to the research object(s).
A sound real and nominal definition is required to enhance efficiency when
communicating about the research object.
2.2 Historical backg round
In their 2015 research paper on the evolution of Fintech Arner et al. (2015) state that
“[t]he term’s origin can be traced to the early 1990s and referred to the ‘Financial
Services Technology Consortium’, a project initiated by Citigroup to facilitate
technological cooperation efforts”. Indeed, the source that the authors provide, an
article published by the media outlet American Banker, mentions a project by the name
of “Fintech” initiated by Citigroup in the early 1990s (Hochstein, 2015a). The
American Banker furthermore published yet another article on the term Fintech with
the title “Friday Flashback: Did Citi Coin the Term 'Fintech'?”. This article is preceded
by an editor’s note asserting that “[t]he article below appeared in American Banker on
August 13, 1993 and contains the earliest use we could find of the now-trendy word
‘fintech.’” (Hochstein, 2015b). It is a reprint of an article published by the American
Banker in August 1993 (Kutler, 1993) and it indeed mentions Fintech as a project label
used by Citibank. This article is the original work that Hochstein (2015b) and later on
Arner et al. (2015) refer to when suggesting that the term Fintech had its origins in the
early 1990s.
Yet, the term Fintech was already used as early as 1972. In a scholarly article where he
was detailing models on how he had analyzed and solved daily banking problems
encountered at the bank Manufacturers Hanover Trust, the Vice President of the bank,
Mr. Abraham Leon Bettinger (Prabook, 2016) provided the following definition
“FINTECH is an acronym which stands for financial technology, combining bank
expertise with modern management science techniques and the computer.” (Bettinger,
1972, p.62). An early citation of Bettinger’s work by Warschauer (1974) furthermore
proves that Bettinger’s work did not go entirely unnoticed during his times. Yet, it still
may well be the case that the imitators of the Fintech project at Citibank in the
beginning of 1990s did not know of Bettinger’s research and used the identical term
for their undertaking by coincidence. It is already noteworthy at this point that neither
academia nor practice can unambiguously be identified as the birthplace of the term
Fintech as a practitioner published a scholarly journal article first applying the term.
Next to the explanations of the word Fintech emanating from the seventies and nineties
of the last century, a plethora of accounts for the term have been proposed in the most
recent years. The following section describes how these definitions were sampled and
processed.
3 Methods
The research method of choice for the investigations at hand was a comprehensive
literature review combined with a thorough semantic analysis. The purpose was to
capture the full scope of definitions of the term Fintech in a first step and to then distill
the pivotal components of the explanations by semantic analysis in a second step. The
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corresponding sample frame applied and the analysis conducted are described in the
subsequent paragraphs.
With regards to linguistics, semantics can be defined as the science of the meanings of
words and of the changes in their meaning (Bréal, 1900). Broadly speaking semantic
analysis is therefore about understanding language. It is the process of identifying the
meaning of linguistic input. Its objective is to process language in order to produce
common-sense knowledge about the world. It does so by extracting data from language,
processing the data and subsequently building representations of the world (Bloch and
Trager, 1942). As the term Fintech has been used for more than 40 years now
(Bettinger, 1972) it is not my objective to reinvent the wheel by producing yet an
entirely new definition of the term and thus to nullify large parts of previous research
by making it incompatible. Rather than that I intend to build on the previous findings
of scholars and apply semantic analysis in order to capture the meaning of this word as
it was previously used by other scholars. By doing so I attempt to put forward a
definition that is consensually considered useful as posited by Scherer (2005).
Consequently, and since my intention is to develop a common denominator that can be
used as widely as possible, I take into account the broadest possible variety of
definitions from as many authors as possible.
3.1 Sample frame
For this literature review, I conducted a systematic search of all major literature
databases related to Management Sciences as well as Economics for all papers
published until October 16, 2016, using the keyword “fintech”. Those data bases
included EBSCO, Business Source Premier, Directory of Open Access Journals
(DOAJ), Emerald Insight, JSTOR, SAGE, Science Direct, Springer Link, Taylor
Francis, and Wiley Online Library. To be fully inclusive, I did not define a start date.
In order to control for the quality of the articles a delimiter so set that only scholarly
journal articles, i.e. peer-reviewed papers would be included in the results. Moreover,
the relevant language was set to English. It was ensured that the searches were not case
sensitive so that all notations of the search term were included, i.e. “fintech”, “Fintech”,
and “FinTech”.
The search was executed in six phases. During the first phase I solely searched for the
term Fintech in the individual paper titles. During the second stage I extended the search
to the corresponding abstracts and in the third phase I opened it up to title and/or
abstract and/or full text. The purpose was to receive a quantitative overview of how
many articles had been published thus far related to the term Fintech. Throughout step
four I sorted out duplicated results as some articles are indexed in and accessible
through more than one data base. In phase five I then carefully examined each one of
the articles that I had identified in the previous phase for any potential definition of the
term Fintech. The purpose of stage six was then to further extend the search beyond the
literature databases listed above in case some of the identified articles had cited works
that were not accessible through those sources. The objective here was to find any
documented precedent of the definitions being applied. If these second level searches
revealed yet additional referenced work, corresponding third level searches were
executed for those sources.
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3.2 Analy sis
The definitions obtained were examined using semantic analysis (Goddard, 2011). The
overall goal of this analysis was to set apart the definiendum, i.e. the defined term,
which is Fintech, and the definientia, i.e. the defining formulas provided by the various
authors (Tarski, 1969). In this context, it should be noted that I attached equal
importance to any definition found. As the academic treatment of the topic is still in its
infancy and thus very little scholarly output exists yet, I did not make further
distinctions among ratings of journals or the number of citations an article has received
etc.
Syntactic structures from definitions of the term Fintech were related to more abstract
levels in order to derive a meaning that was as independent as possible from the specific
wordings used in the individual definitions. Moreover, specific features were
condensed or removed where necessary in order to lay the basis for developing a clear-
cut, commonly acceptable definition of the term.
Throughout the analysis a particular emphasis was put on the objects that the authors
used to define the term Fintech and attributes they applied to further characterize the
object. It was further delineated what Fintech comprises / involves and which objectives
were pursued by Fintech. Furthermore, note was taken of the results Fintech produces,
in case this information was provided by the individual authors.
The subsequent results section provides an overview of the quantitative occurrences of
the term Fintech but also about the specifications used to define the term. It furthermore
offers a synthesis of the term.
4 Results
The number of counts of the word Fintech being used in article titles, abstracts and full
text searched as well as the number of definitions provided for the term are presented
in the table below.
Table 1. Counts of the word Fintech in databases
Sources
Hits in
Title
AND/OR
Abstract
AND/OR Full
Text
No of definitions
provided
EBSCO
10
12
60
-
Business Source Premier
16
25
28
-
DOAJ
2
3
4
1
Emerald Insight
-
-
-
-
JSTOR
2
2
11
-
SAGE
-
-
-
-
Science Direct
2
2
53
1
Springer Link
-
-
26
2
Taylor Francis
1
1
38
3
Wiley Online Library
2
2
3
1
Subtotal Literature Databases
35
47
223
8
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Sources
Hits in
Title
AND/OR
Abstract
AND/OR Full
Text
No of definitions
provided
others, peer-reviewed
3
Subtotal Scholarly Sources
42
54
354
11
others, non peer-reviewed
3
Subtotal all sources
35
47
223
14
Total corrected for duplicated results
28
37
203
13
The results vary strongly among the data bases consulted, yet the total sums are
considerable as far as the pure word counts are concerned: Across all literature
databases and prior to adjusting for duplicated entries 35 scholarly articles display the
word Fintech in their title. 45 academic papers make use of that term in the title and/or
abstract and a total of 223 peer-reviewed works make use or reference the expression
one or multiple times throughout the full text, including footnotes and biographies. The
count of 223 texts contrasts sharply with the number of definitions provided, i.e. 14.
After adjusting for repeated entries, still 28 peer-reviewed papers display the word
Fintech in the title. 37 scholarly works make use of that term in the title and/or abstract
and a total of 203 works scientific use the expression on one or multiple occasions
throughout the entire text. Yet only 13 articles or 6% actually define the concept.
The definitions of the term Fintech along with the corresponding authors and a semantic
analysis can be found in Table 2.
(Micu and Micu, 2016) (Shim and Shin, 2016) (Maier, 2016)
(Čižinská et al., 2016) (Lončarski, 2016)
(Shen and Huang, 2016) (Xie et al., 2016)
(Jun and Yeo, 2016) (Kim et al., 2016) (Xie and Zou, 2013)
(Barberis, 2014)
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Table 2. Definitions of term fintech, sources, and semantic analysis
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Table 2 (continued). Definitions of term fintech, sources, and semantic analysis
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Table 2 (continued). Definitions of term fintech, sources, and semantic analysis
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Table 2 (continued). Definitions of term fintech, sources, and semantic analysis
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Table 2 (continued). Definitions of term fintech, sources, and semantic analysis
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When looking at the “genealogical tree” of the definitions it becomes apparent that two
scholarly articles actually cite practitioner work: Shim and Shin (2016) cite a report by
Barberis (2014) and Čižinská et al. (2016) refer to the Web page of the Wharton Fintech
Club (Wharton Fintech Club, 2014). One peer-reviewed article by Shen and Huang
(2016) cites scholarly work by Xie and Zou (2012). The remaining eight definitions are
explanations sui generis. The definition provided by Wharton Fintech Club was taken
out of the total number count as it represented a double entry for it was quoted verbatim
by Čižinská et al. (2016).
The term Internet Finance that Shen and Huang (2016) referred to and which was -
according to the authors - identical to the term Fintech, was mentioned in the article by
Xie and Zou (2012). The original article by Xie and Zou (2012), however, was written
in Chinese. I therefore reverted to another article by Xie and Zou which was published
in 2013 and which also defined the term Internet finance aka Fintech [according to Shen
and Huang (2016)], yet this time in English (Xie and Zou, 2013).
The semantic analysis yielded the following commonalities as far as the definientia are
concerned: Four of the ten discriminable scholarly definitions claim Fintech to be a
sector or industry. Two further explanations define it as a technology. Three sources
are detailing Fintech as a type of action, let that be a business, a services and or very
broadly activities. When looking at the attributes used in conjunction with the term
Fintech five sources speak of Fintech as something novel, i.e. they describe it as new,
emerging, innovative or disrupting. The attribute financial is used twice. When further
investigating the peer-reviewed works what Fintech comprises or involves in a broader
sense, technology is directly mentioned three times and one more time as “computer”.
Two see Fintech as involving financial activities in the broadest sense. When examining
the academic definitions for the objectives of Fintech, enhancing the efficiency of or
facilitating financial services comes up as the common denominator three times. No
common grounds could be identified regarding the results Fintech brings about.
With these most often mentioned commonalities of the scholarly definitions of Fintech
in mind, the following definition for the terms Fintech is proposed:
Fintech is a new financial industry that applies technology to improve
financial activities.
After proffering this definition it will be discussed in depth over the next paragraphs.
5 Discussion
The definition provided above is a synthesis building on commonalities of the
definitions that have been applied to Fintech in literature. In its current form, it is a real
or essentialist definition. Putting the definiendum at the end, it can also just be used as
a abbreviatory, nominal or verbal definition. Hence, this definition can by expected to
not only serve the research community as a real definition, but also the practitioner’s
sphere by applying it as a nominal definition. Moreover, and as the epistemological
guard rails suggest that I have presented above, the derived definition of Fintech is
broad enough to capture the essential quality of the object, i.e. it is a new financial
industry that applies technology to improve financial activities, yet it is narrow enough
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to discriminate these objects from other objects. For instance, this definition is broad
enough to capture financial services improving technologies which are incremental
(APIs, device independent technology, signature scanning) as well as disruptive ones
(Chat Bots, the Block Chain, artificial intelligence etc.). At the same time it clearly
excludes the largely mainframe and paper-based old type of banking services which are
oftentimes even delivered through a human interface.
Representing a synthesis of many previously suggested definitions, it may serve as a
common denominator, yet it may not be comprehensive or distinct enough for all
authors and under all circumstances. In this context it is important to note that building
on the thoughts of Scherer (2005) I am of the opinion that a definition is never true or
false per se, but more or less useful in a specific context. For instance, if we consider
the term “power”. How would a physicist define it? How a politician? Which definition
would a judge provide? Which explanation would an athlete give? Moreover, even
within the domain of sports you are likely to receive different answers, depending on
whom you ask. A weight lifter will most probably provide you with a different answer
is than the fellow athlete from the same Olympic team who competes in synchronized
swimming. Hence it has to be accepted that - contingent on the counterparty one asks -
one may well receive varying answers on the identical question. There is no reason to
believe that varying definitions of Fintech may be more or less useful under differing
circumstances.
Another reason why the definition provided above can merely serve as a starting point
for future explanations of the term is, because definitions change over time. Here, too,
we can draw on analogies from other fields. Information technology or “IT” serves as
a good illustration. In the early days of computing IT stood for items such punched
tapes and cathode ray tubes (Ifrah et al., 2000; Metropolis, 2014; Williams, 1997).
Today, however, we much rather associate things such as Motion User Interfaces, Bots
and the Internet of Things with IT. Consequently, it is also safe to assume that the
expression Fintech undergoes change. The definition of the term Fintech provided by
the Web page Investopedia pays tribute to this fact: “Fintech is a portmanteau of
financial technology that describes an emerging financial services sector in the 21st
century. Originally, the term applied to technology applied to the back-end of
established consumer and trade financial institutions. Since the end of the first decade
of the 21st century, the term has expanded to include any technological innovation in
the financial sector, including innovations in financial literacy and education, retail
banking, investment and even crypto-currencies like bitcoin.”. Hence, for the authors
of Investopedia, Fintech was originally an expression describing banking backend
technology, but widened over time to also encompass technological innovations in
financial services and related areas (Investopedia, 2016). Moreover, it must be stressed
that the definition derived above asserts that “Fintech is a new financial industry […]”.
The word “new” is inherently hard to elucidate in this context and it is therefore safe to
assume that this component of the definition will be altered in the near future. Hence,
the definition for Fintech will then be the following “Fintech is a financial industry that
applies technology to improve financial activities”.
However, other fields of business and academia have proved that science as well as
practice can cope with a certain degree of definitional ambiguity. Terms such as
“strategy”, “innovation” or “business model” are being used on daily basis by
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practitioners and academics alike, yet we have not established one common definition
for any of these words [insights in the definitional difficulties regarding the term
strategy are provided by De Wit and Meyer (2010), for innovation see Baregheh et al.
(2009), for business model consult Morris et al. (2005) respectively]. Thus, having not
one single static definition for the word Fintech has so far not prevented scholar and
practitioners from using it. However, when applying the term Fintech one should make
clear to the audience or readership what is meant by it. Providing such an explanation
significantly improves the efficiency of communication and reduce the potential for
misunderstandings. Moreover, only a shared definition will permit the emergence of a
meaningful which is fundamental to science (Waugh, 1997).
6 Conclusion
The overall claim of this article is that no one single definition of Fintech exists. After
more than 40 years that the term has been used in practice as well as literature there is
no agreement as to what Fintech entails. The process of deriving a shared language for
business phenomena has long been recognized to be a daunting task (Daft and
Wiginton, 1979). By demonstrating elusiveness of Fintech as a concept this paper
corroborated this assertion. The differences in definitions revealed by the literature
review, underscore that there are definitional problems with Fintech. This is often
compounded by the interchangeable use in the practice, but also in scholarly literature.
In order to nevertheless derive commonalities among definitions of the term Fintech, I
pursued the most comprehensive review of definitions of the term Fintech that has thus
far been published. By applying a semantic analysis, I then closely examined the
similarities of the definitions of Fintech that have been used in scientific literature and
pointed out the major commonalities. On the quest for a common understanding of the
term Fintech I also ventured into the spheres of practice as the notion of Fintech seems
to be repeatedly crisscrossing the boundaries between academic and practical domains.
Building on the common grounds that these definitions possess, I extracted a new
definition as the least common denominator.
This research has implications for scholars, practitioners and policy makers alike. With
regards to the first group of stakeholders, this study solidifies the basis for scientific
research on Fintech by crafting a network of existing scholarly works to constitute a
single definition for the term Fintech. In this way it contributes to constructing
intertextual coherence in a novel area of studies and thus helps to lay the foundation for
sound scientific work in this area. Moreover, it will facilitate teaching the subject of
Fintech as the area can now be delimited to a higher degree. This delineation will
increase focus and efficiency of passing on subject-related knowledge. As far as
practitioners are concerned, the clear definition of the subject will also decrease the
likelihood of misunderstandings and increase the efficiency of communication on the
topic. It is safe to assume that many board room meetings in the financial services
industry and beyond nowadays revolve around the topic of Fintech, yet participants
may not have a common understanding of this term. Finding common grounds on the
subject will facilitate any Fintech related discussion. In a similar vein, this clarification
of the term Fintech will provide policy makers with a more tangible accord of this
subject. Fintech has various ramifications to be observed by policy makers. Being a
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means of job creation is certainly one of them, yet topics such as consumer protection
will also become increasingly important. Having a common denominator for
discussions will certainly help policy makers shaping their discussions. However, what
should be kept in mind by all stakeholders using the term Fintech, is that differing
definitions may still continue to exist, especially amongst languages. Clarifying and
communicating one’s own definition of the term prior to any decisive discussion thus
becomes paramount, should any dialog on Fintech be meaningful and efficient.
Nonetheless, the definition of Fintech offered above should be seen as a mere starting
point for harmonizing and encompassing all the varied perceptions in order to obtain
consensus, if only in operational terms. Once this is settled researchers and educators
may begin researching and teaching this concept using the same definitional backdrop.
7 Limitations and future research directions
Obviously, no research is without limitations and this paper is no exception. In this
study the term Fintech was examined without prefixed article. However, during the
research for this paper I have also encountered the expression “a Fintech” in texts as
well as in conversations. This leads to the questions whether a difference exists between
“Fintech” and “a Fintech”. To my experience people typically refer to a Fintech
company or more specifically to a Fintech start-up when they talk about “a Fintech”
(e.g. see Treasury Today, 2016). Hence, the difference is to be located on the level of
analysis: “Fintech” without article typically to industry whereas “a Fintech” is just one
single entity belonging to this industry. This apparently small difference by the prefix
“a”, can give rise to serious misunderstandings. To a policy maker, for instance, it will
make a large difference, whether he or she is asked to support creating an industry
cluster or even entire industry or just one single firm. The same goes for a venture
capitalist albeit with opposite signs. Another semantical limitation results from the fact
that this study considered Fintech solely to be a noun. However, Fintech is also being
used as an adjective. The business press progressively talks about fintech hubs, fintech
suppliers, fintech businesses, even about fintech Careers (Hughes, 2016).
Another limitation of the paper emerges from the fact that the research solely focused
on the English language. Yet, the term Fintech may substantially vary across languages.
To illustrate this fact, definitions of the term Fintech were polled from different
language versions of Wikipedia. Relating to the Wharton Fintech Club’s definition of
the term, the English version of Wikipedia, states that “[f]inancial technology, also
known as fintech, is an economic industry composed of companies that use technology
to make financial services more efficient.” (Wikipedia, 2016a). The Italian site by
comparison asserts that Fintech is the “provision” of financial products and services
using information technologies [“La tecnofinanza, o tecnologia finanziaria (in inglese
Financial Technology o FinTech) è la fornitura di servizi e prodotti finanziari attraverso
le più avanzate tecnologie dell'informazione (TIC)”] (Wikipedia, 2016d). By contrast,
the German Wikipedia definition of Fintech suggests that Fintech is an umbrella term
for “modern technologies in the area of financial services” [“Finanztechnologie (auch
verkürzt zu Fintech bzw. FinTech) ist ein Sammelbegriff für moderne Technologien im
Bereich der Finanzdienstleistu ngen”] (Wikipedia, 2016b). The French Wikipedia
version is much closer to the English one, yet it does not define Fintech as an industry,
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but more loosely as an “area of activity” [“La technologie financière, ou FinTech, est
un domaine d'activité dans lequel les entreprises utilisent les technologies de
l'information et de la communication pour livrer des services financiers de façon plus
efficace et moins couteuse”] (Wikipedia, 2016c). Hence, just by comparing across a
small random sample of languages one can already fathom the potential for
misunderstandings. While the Frenchman may be talking about Fintech as a business
segment, the German may be speaking about technologies, the Italian about a delivery
channel and the native English speaker may refer to an entire industry. Being aware of
potential pitfalls is all the more important as the term Fintech has been derived from
the English words financial technology, yet it is also used as such in various other
languages. Thus people may automatically assume that they talk about identical things
whilst they are not. In addition one should bear in mind that Fintech is a global
phenomenon (Mackenzie, 2015). Running into questions of semantics across languages
may happen easier than anticipated. An in-depth study of the applications of the term
Fintech in different languages would undoubtedly be of interest.
A third shortcoming of this article emanates from the fact that the term Fintech is
already showing offsprings. Especially in the popular press as well as on Internet media
outlets one can regularly come across terms such as Wealthtech (see e.g. Cheok, 2016),
Insurtech (see e.g. Ralph, 2016), Regtech (see e.g. Crosman, 2016) etc. in the context
of Fintech. These expressions have not been touched upon in this article. As Fintech
will grow more mature it would certainly be beneficial to established common
definitions for these terms, too.
Last but not least definitional problems with the term “definition” should be noted. In
his article “what is a definition” James Brown attempted to provide some explanation
on what a definition is. After lengthily discussion the problems of defining a definition
his article ends with the words “The question in the title what is a definition? Remains.
It’s a wide open problem” (Brown, 1998, p.131). Hence, if - from a scientific
perspective - the term definition is already standing on shaky grounds, one always
needs to bear in mind that any new definition derived will be standing on at least as
instable lands.
From an academic point of view Fintech is still an untilled field. Hence, plentiful new
research strands are perceivable. One of the most pressing one is surely the relationship
between Fintech firms and incumbent players. Do they view each other as complements
or competitors? Would mergers and acquisitions make sense or would strategic
alliances yield more value? Another research question on industry level could be what
sets apart Fintech firms from incumbent players. They oftentimes serve identical
clients, yet Fintech firms and incumbent companies are in general fundamentally
different. How do they differ in terms of vision and strategy, organizational structure,
processes, and culture? Moving down the value chain, additional research questions
arise from marketing and sales, i.e. How do Fintech firms approach clients? Which
client segments are they typically targeting? What is their pricing model? Valuable
insights could also result from investigating the support functions of Fintech firms:
How is finance ensured? Which kind of HR model do Fintech firms pursue?
So what has Fintech in store for us? Fintech is poised for further growth. So far, we
have been witnessing individual Fintech startups that have just begun seizing individual
parts of the financial services value chain and optimizing them. This puts incumbent
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players in a difficult position as parts of their oftentimes most lucrative businesses are
breaking away whilst they are left with the regulatory burden and the associated costs.
At the same time, Fintech still needs to prove that it is not just a fleeting star. Despite
its remarkable growth in the recent years, Fintech still needs to provide evidence that it
is a sustainable phenomenon even in markets which are on the downturn.
Developing at a very high pace, it is safe to say that parts of current Fintech momentum
will slow down in the years to come. Some market observers even go as far to say that
there is a Fintech bubble building up which is likely to burst soon. However, the Internet
and eCommerce did not disappear with the burst of the Dot-Com bubble. On the
contrary, the innovations made in the years leading up to the bubble burst prevailed.
Web technologies have never been as pervasively applied as today. A Web sales
channel or at least an information outlet has become a standard for most enterprises in
the western world. Hence, Internet technology did not disappear with the burst of the
Dot-Com Bubble. Rather than that, it was absorbed, transformed, and adopted by the
majority of firms in the western world and turned into a business standard.
It is likely that similar things will happen to Fintech. Turning into an outcast in the eyes
of investors in the event of a bubble burst, Fintech will then disappear as a label.
However, a good share of the innovations brought forward by Fintech firms will then
be absorbed by other players, such as by incumbent banks, insurers and software
companies and be kept alive. In other words, even if the Fintech genie deflates it will
still continue to live in its bottle. And this time we will be able to stick a proper label
on it.
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... Literature Review and Research Hypotheses Schueffel (2016) summarized previous research results and defined digital finance as an emerging financial industry that applies information technology to improve financial activities. Gomber, Koch, and Siering (2017) believe that digital finance usually refers to the financial business realized by using digital technology. ...
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The problems, associated with the development of new digital technologies, which, in turn, have an impact on the activities of large financial institutions of the Russian Federation, have been examined in the article. The aim of the study is to analyze the current situation in the economy, related to the growth of the market for digital products, their integration into the existing model of providing financial services to clients, as well as finding solutions to the joint activities of financial corporations and financial and technological companies. The definitions and main activities of financial corporations and fintech startups have been given in the article. The advantages and disadvantages of a large financial corporation and developing companies, operating in the field of digital technologies, as well as the positive results of combining their resources, have been highlighted. Positive examples of world experience in cooperation between the two types of these organizations and the attitude of the main regulator of the Central Bank of Russia to the development and implementation of financial technologies in the country’s economy have been adduced.The problems and opportunities of high competition in the struggle for the modern consumer, which lead to the rapid development of the entire financial industry market, have been analyzed. The results of the study have showed, that every day, worldwide, fintech companies test a significant number of digital products, various open architecture tools, methods of transferring information through blockchain technologies, and optimize and integrate into the existing systems new client base programs, that completely change the main business processes of large enterprises and have a significant impact on the main consumer - a person. This indicates the need for further research aimed at studying and analyzing the integration of financial corporations with technology companies, changing the existing business model, finding new approaches to the modern consumer and creating a new organization development strategy in the digital economy of the country.
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Fintech is the delivery of financial products and services to consumers using a combination of innovation and technology. Fintech offers new solutions that have the potential to replace traditional banking operations. The paper presents, as the first contribution of its kind, a summary of the legislation and innovation facilitators provided by Central and Eastern European (CEE) countries for fintech companies. The purpose of this paper is to identify the barriers and challenges created for fintech companies by the current legislation. Another goal is to see how the regulatory environment adapts to the challenges presented by these technology-based companies operating in the financial and banking sectors. Using a comparative analysis, the most progressive countries regarding the preparation of legislation and the facilities that they create for fintech companies are Estonia, Lithuania, and the Republic of Slovakia. The least developed countries in terms of legislation and facilities for fintech companies are Albania, Bosnia and Herzegovina, Kosovo, and Serbia. Regulators in some Central and Eastern European countries have created Regulatory Sandboxes and Innovation Offices, but fintech companies face many challenges, such as a lack of regulations, the prohibition of fintech companies' activities, and the existence of two different regulators.
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Fintech is revolutionizing the way consumers react to financial services offered, the channels of service delivery by financial institutions, and the process of regulating a series of emerging technologies by the regulators. Large, generally conventional, banks are believed to have strong technology infrastructure to support such a massive change, while Islamic financial institutions, with relatively smaller size and clustered operation, may find Fintech as a new challenge. Despite numerous published sources on Islamic banks’ exposure to Fintech, resources on the broader domain of Islamic financial institutions are relatively smaller. This chapter emphasizes this gap and points out how Islamic banks and their allied siblings are exposed to Fintech. We discuss points of convergence between Fintech and Islamic finance by taking examples from applications currently in existence. We also discuss relevant challenges.
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COVID-19 has created massive havoc to the global operations and business processes and the uncertain economic conditions have made the world think about the abrupt solutions to tackle the problem efficiently. Islamic fintech has provided the world with innovative solutions to overcome the devastating impact of this pandemic. Against this backdrop, this study aims to investigate the effective solutions provided by Islamic fintech in the post-COVID period. The study mainly opted for the qualitative framework to carry out its research and provide workable solutions to the world offered by Islamic fintech in the post-COVID era. Various technological innovations compatible with Islamic finance have initiated a great deal of competition with its long-lasting and sustainable impact on the growth of the economies. The COVID period, which is still going on, is marked by substantial growth and development followed by the fintech innovations to address the demands of the customers. This study is expected to play a key role in promoting the Islamic fintech solutions to overcome the economic hazards created by the coronavirus pandemic.KeywordsCOVID-19Economic downfallIslamic fintechRecovery stagesResponse to COVID-19
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The research took a realistic look at how the development of financial technology has affected Nigeria's thriving MSME sector. A total of 69 participants were used in the study, which followed a descriptive research methodology. Research on descriptive and inferential statistical models was performed using primary source data. The scientific analytical results exposed that, Flutterwave and Opay have a positive significant relationship with service delivery. This implies that as the services improve, service delivery also improve in the MSMEs in Nigeria. But unfortunately, Flutterwave has a negative significant nexus with capital structure, while Opay has significant relationship with capital structures of MSMEs in Nigeria. Regarding the impact of Fintech construct on MSMEs', the study found a significant performance and efficiency. However, the constructs, considered individually, Flutterwave and Opay have significant impact on service delivery, while Flutterwave and Opay have insignificant and substantial impact on capital structure respectively. Based on the findings, the study recommends that MSMEs should adopt Fintech payment channels in their operations as it centers on ease, speed and convenience, MSMEs should explore Fintech serves as they are easy and collateral free loans in sourcing for capital. Government should provide an environment that would allow Fintech to strive and reduce the cost of Fintech operations in order to create a corresponding job opportunities in the society.
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Internet finance is a spectral concept. It covers all forms of financial transactions and organizations, which range from traditional financial intermediaries and markets, such as commercial banks, securities firms, insurance companies, and stock exchanges, to the scenario under Walrasian equilibrium (where neither financial intermediaries nor markets exist) caused by the impacts of internet technologies. This article discusses the theoretical pillars, core features, and policy implications of internet finance.
Consumer crowdlending to small and medium enterprises is an increasingly relevant financial service phenomenon which depends on platforms as an intermediary. To match borrowers’ supply of loan requests and customers’ investment demand, this article proposes that crowdlending platforms need to initiate double switching behavior. On the one hand, switching of enterprise borrowers from traditional bank financing to crowdlending is driven by greater convenience (speed, flexibility, simplicity) and process transparency. Consumers, on the other, predominantly invest in crowdlending loans based on their economic performance relative to the choice set on the platform. We contribute to the literature on crowdfunding, satisfaction and switching in financial services.
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We investigate the effects of entry of financial technology (FinTech) based firms on competition in the retail payments market. With a model of two-sided market with vertical restraints, we derive the following results. When only the entry of a vertically integrated (or end-to-end service) provider is allowed, either all merchants opt for multi-homing or no entry occurs, regardless of the regulatory requirement. On the other hand, if the entry of a downstream-only (or front-end service) provider is allowed, a partial multi-homing equilibrium could emerge under certain conditions, in which the entry of an end-to-end service provider does not occur. Without regulation, however, the vertically integrated incumbent does not voluntarily provide the back-end service to the entrant in general. This suggests the need for proper regulatory measures to reach a socially desirable outcome from the new entry in the retail payments market.
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This paper examined the acceptance of payment-type Fintech services of users by utilizing the Elaboration Likelihood Model by Petty and Cacioppo [1] and by applying variables associated with the Technology Acceptance Model. In addition, it analyzed the causal relationship between concern for information privacy and self-efficacy by adopting them as moderating variables. Results suggested that usefulness, ease of use and credibility had an effect on intention to use, and self-efficacy was found to have an moderating effect on independent and dependent variables. Further, concern for information privacy was found to be a factor obstructing the path to intention to use. The implications of this study are that in the promotion of payment-type Fintech services, convenience and usefulness are the most critical and influential variables in terms of usage, while government deregulation and stronger security are called for from an institutional aspect.
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The rapid development of information and communications technology is transforming the entire industry landscape, heralding a new era of convergence services. As one of the developing countries in the financial sector, China is experiencing an unprecedented level of convergence between finance and technology. This study applies the lens of actor-network theory (ANT) to conduct a multi-level analysis of the historical development of China's financial technology (fintech) industry. It attempts to elucidate the process of building and disrupting a variety of networks comprising heterogeneous actors involved in the newly emerging convergence industry. This research represents a stepping stone in exploring the interaction between fintech and its yet unfolding social and political context. It also discusses policy implications for China's fintech industry, focusing on the changing role of the state in fostering the growth of national industry within and outside of China.