Content area
Full text
The magical combination of geeks in T-shirts and venture capital that has disrupted other industries has put financial services in its sights. (Anonymous, 2015)
1. Introduction
In a surprisingly prescient manner, FinTech was defined by Bettinger (1972) as, “…an acronym which stands for financial technology, combining bank expertise with modern management science techniques and the computer.” Nearly 50 years later, the widespread adoption of the personal computer and the existence of the Internet and mobile connectivity, the current state of FinTech deserves a fresh treatment.
Finance has been characterized by technology throughout its history as noted by Ferguson (2018). He asserts innovations have been the cornerstone of finance including the earliest uses of money, the introduction of Arabic numerals and interest theory, the birth of the bond markets in Italy, creation of the joint-stock company and the secondary market for shares in the Netherlands, through modern manifestations via central banking, ATMs and digital currency. Yet it appears that FinTech has unleashed something beyond the normal path of financial technology. How rapid is this advance now? A search in ABI/INFORM shows the usage of the term FinTech has grown twenty-five-fold over the past decade to over 1,000,000 works containing the term FinTech, spawned by a new industry of FinTech firms (Figure 1). The FinTech industry is the focus of this paper.
To encourage FinTech research, The Review of Financial Studies issued a novel call for a special issue dedicated to FinTech (Goldstein et al., 2019). Financial Management similarly published a special issue regarding FinTech (Parlour, 2019) and the Journal of Corporate Finance has issued a Call for Papers for a conference and special issue on FinTech and Digital Finance. These were preceded by a 2017 conference, jointly sponsored by the Federal Reserve Bank of Philadelphia and the New York Stern School of Business (Jagtiani and John, 2018).
Jensen and Meckling (1976) theorized that a firm is a nexus of contracts. The nature of these contracts governs what types of products and services different firms will provide. While nothing prevents a firm from shifting its strategy, in practice firms often organize along lines of business recognized as industries. In a traditional sense, the FinTech industry defies easy classification. Although products and services provided by the industry...