Can Fintechs Stabilize the Financial Sector?

Martin Windl

VfS Annual Conference 2020 (Virtual Conference): Gender Economics from Verein für Socialpolitik / German Economic Association

Abstract: The growing popularity of fintechs has led the Financial Stability Board (FSB) to publish considerations about the effects of this emerging industry on stability and efficiency in the financial sector. Against this background, this paper compares the effects of competition and collaboration between banks and fintechs on stability and efficiency. Using a partial equilibrium model and a general equilibrium model with moral hazard between investors and the financial sector based on Martinez-Miera and Repullo (2017), this paper shows that cooperation between banks and fintechs increases stability and efficiency compared to the case of a competitive equilibrium. The findings are robust to changes in bargaining power within the financial sector but depend critically on contestable loan markets.

Keywords: fintech; bigtech; financial stability; general equilibrium (search for similar items in EconPapers)
JEL-codes: G21 G23 G28 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-ban, nep-fdg and nep-pay
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc20:224622

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