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Financial functional analysis: a conceptual framework for understanding the changing financial system

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  • John P. Wilson
  • Larry Campbell

Abstract

The financial system is currently undergoing a revolution brought about by e-finance, digital convergence, new market entrants and government-encouraged competition. New market entrants such as Apple, Alibaba, Facebook and Google come from industries such as IT, retail, social media and telecoms, and, therefore, do not fit comfortably within traditional financial institutional structures. A functional perspective might provide more practical insights into this revolution; however, the functional perspective has had a limited impact. This paper will investigate the benefits and limitations of financial functional analysis; probe the underpinning principles of sociology’s structural functional analysis; revisit Merton and Bodie’s (1995) six core financial functions in relation to new entrants in the financial landscape; and, finally, argue that in the new financial environment, functional analysis provides a more coherent and explanatory framework of the financial system for students and practitioners alike.

Suggested Citation

  • John P. Wilson & Larry Campbell, 2016. "Financial functional analysis: a conceptual framework for understanding the changing financial system," Journal of Economic Methodology, Taylor & Francis Journals, vol. 23(4), pages 413-431, October.
    • Handle: RePEc:taf:jecmet:v:23:y:2016:i:4:p:413-431
    DOI: 10.1080/1350178X.2016.1157200
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    Cited by:

    1. Yingying Zhang-Zhang & Sylvia Rohlfer & Jay Rajasekera, 2020. "An Eco-Systematic View of Cross-Sector Fintech: The Case of Alibaba and Tencent," Sustainability, MDPI, vol. 12(21), pages 1-25, October.
    2. Merton, Robert C. & Thakor, Richard T., 2019. "Customers and investors: A framework for understanding the evolution of financial institutions," Journal of Financial Intermediation, Elsevier, vol. 39(C), pages 4-18.
    3. Jing, Zhongbo & Liu, Zhidong & Qi, Liyao & Zhang, Xuan, 2022. "Spillover effects of banking systemic risk on firms in China: A financial cycle analysis," International Review of Financial Analysis, Elsevier, vol. 82(C).
    4. Xiao Ling & Luanfeng Wang & Yuxi Pan & Yanchao Feng, 2023. "The Impact of Financial Literacy on Household Health Investment: Empirical Evidence from China," IJERPH, MDPI, vol. 20(3), pages 1-23, January.
    5. Sergey Evgenievich Barykin & Larisa Nikolaevna Borisoglebskaya & Vyacheslav Vasilyevich Provotorov & Irina Vasilievna Kapustina & Sergey Mikhailovich Sergeev & Elena De La Poza Plaza & Lilya Saychenko, 2021. "Sustainability of Management Decisions in a Digital Logistics Network," Sustainability, MDPI, vol. 13(16), pages 1-17, August.
    6. Vladimir Yadykin & Sergey Barykin & Vladimir Badenko & Nikolai Bolshakov & Elena de la Poza & Alexander Fedotov, 2021. "Global Challenges of Digital Transformation of Markets: Collaboration and Digital Assets," Sustainability, MDPI, vol. 13(19), pages 1-16, September.
    7. Tianlei Pi & Haoxuan Hu & Jingyi Lu & Xue Chen, 2022. "The Analysis of Fintech Risks in China: Based on Fuzzy Models," Mathematics, MDPI, vol. 10(9), pages 1-13, April.

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