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How disruptive is financial technology?

Author

Listed:
  • Cumming, Douglas
  • Farag, Hisham
  • Koirala, Santosh
  • McGowan, Danny

Abstract

We study whether Financial Technology (Fintech) disrupts the banking sector by intensifying competition for scarce deposits funds and raising deposit rates. Using difference-in-difference estimation around the exogenous removal of marketplace platform investing restrictions by US states, we show the cost of deposits increase by approximately 5.9% within small financial institutions. However, these price changes are effective in preventing a drain of liquidity. Size and geographical diversification through branch networks can mitigate the effects of Fintech competition by sourcing deposits from less competitive markets. The findings highlight the unintended consequences of the growing Fintech sector on banks and offer policy insights for regulators and managers into the ongoing development and impact of technology on the banking sector.

Suggested Citation

  • Cumming, Douglas & Farag, Hisham & Koirala, Santosh & McGowan, Danny, 2026. "How disruptive is financial technology?," Research Policy, Elsevier, vol. 55(3).
    • Handle: RePEc:eee:respol:v:55:y:2026:i:3:s0048733326000144
    DOI: 10.1016/j.respol.2026.105423
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    JEL classification:

    • D26 - Microeconomics - - Production and Organizations - - - Crowd-Based Firms
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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