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Innovation in the financial industry: fintech and venture capital

Author

Listed:
  • Antonia Manzini

    (Bank of Italy)

  • Diego Scalise

    (Bank of Italy)

Abstract

Technological innovation has profoundly transformed financial services. This paper examines the diffusion of technology-intensive firms operating in the financial sector (fintech) and the pivotal role of venture capital in supporting their development. The analysis reveals an ecosystem predominantly consisting of small fintech firms, which cluster in the financial centres of countries with more developed capital markets. These locations are home, in particular, to business-to-business (B2B) firms, which frequently develop digital solutions for financial institutions. In this environment, incumbent financial intermediaries become the natural acquirers of the most promising fintech start-ups, integrating their technologies and capabilities into their value chains. Access to diversified sources of finance is a key determinant of these firms' growth. Venture capital acts as a catalyst by fostering strategic partnerships and facilitating the integration of innovative technologies, thereby contributing to the transformation of traditional financial intermediation. The distribution of fintech firms and the evolution of their financing cycle portray a sector undergoing a transition from an initial phase of rapid expansion to one of gradual consolidation.

Suggested Citation

  • Antonia Manzini & Diego Scalise, 2026. "Innovation in the financial industry: fintech and venture capital," Questioni di Economia e Finanza (Occasional Papers) 1055, Bank of Italy, Economic Research and International Relations Area.
    • Handle: RePEc:bdi:opques:qef_1055_26
    as

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    File URL: https://www.bancaditalia.it/pubblicazioni/qef/2026-1055/QEF_1055_26_EN.pdf?language_id=1
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    References listed on IDEAS

    as
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    2. Josh Lerner & Ramana Nanda, 2020. "Venture Capital's Role in Financing Innovation: What We Know and How Much We Still Need to Learn," Journal of Economic Perspectives, American Economic Association, vol. 34(3), pages 237-261, Summer.
    3. Zheng, Hao & Mao, Mike Qinghao, 2024. "Fintech mergers and acquisitions," Journal of International Money and Finance, Elsevier, vol. 143(C).
    4. Paola Rossi & Diego Scalise, 2022. "Financial development and growth in European regions," Journal of Regional Science, Wiley Blackwell, vol. 62(2), pages 389-411, March.
    5. Raffaele Gallo & Federico Maria Signoretti & Ilaria Supino & Enrico Sette & Paolo Cantatore & Marco Luigi Fabbri, 2025. "The Italian venture capital market," Questioni di Economia e Finanza (Occasional Papers) 919, Bank of Italy, Economic Research and International Relations Area.
    6. Gimede Gigante & Lorenzo Galotta & Francesca Scarlini, 2025. "Market Reactions to Fintech M&A: Evidence from Event Study Analysis of Financial Institutions," JRFM, MDPI, vol. 18(10), pages 1-24, October.
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    More about this item

    Keywords

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    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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