Working Paper: CEPR ID: DP15352
Authors: Stephen G. Cecchetti; Kermit Schoenholtz
Abstract: Technology has long had a profound impact on financial services. Today, it is changing the range of services offered, as well as their delivery, cost, and accessibility. Yet, despite the explosion of small firms applying new technologies, very few of these new fintech companies have a broad influence on financial activity. Even in some sectors with significant entry, unit costs of financial intermediation remain stubbornly high. At the same time, there are notable fintech successes, especially in the provision of payments and credit in China. Going forward, the impact of fintech is likely to be greatest where existing suppliers lack competitive incentives or sophistication.Over the next decade, the decisions of regulators will have a profound influence on the array of financial services available, on how they are delivered and to whom. In the advanced economies, regulators generally support greater fintech competition, favoring lower costs and improved access. Furthermore, as Big Tech firms and large incumbent financial institutions vie for dominance, their large fintech investments will make them increasingly alike. Over time, it is anyone’s guess which of these firm types will win the race.
Keywords: fintech; big tech; financial services; financial institutions; financial innovation; financial regulation; digital currency; central bank digital currency; remittances; peer-to-peer lending
JEL Codes: G20
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Technology (L63) | Changes in financial services (G20) |
| Technology (L63) | Delivery costs (L87) |
| Fintech innovations (G21) | Traditional financial structures (G19) |
| Regulatory decisions (G18) | Future of financial services (G20) |
| Regulators (L51) | Fintech competition (G29) |
| Competition (L13) | Costs and access (R48) |
| Big tech firms and traditional financial institutions (G29) | Convergence in operations (L23) |