Banking regulation got you down? The rise of fintech and cryptointermediation in Africa

Edward Peter Stringham ()
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Edward Peter Stringham: Trinity College

Public Choice, 2023, vol. 197, issue 3, No 9, 455-470

Abstract: Abstract Lack of access to financial services is a problem for many; worldwide, one in four adults does not have a checking or savings account. Financial institutions with active, low-balance accounts often face considerable challenges compared to larger financial institutions (Black, 1979). Adding a fixed regulatory cost of servicing accounts can affect relative costs and thus generate an Alchian-Allen effect (the third law of demand) that leads financial institutions to quit servicing these low-balance accounts. Regulators may prefer this outcome as it is easier to regulate and extract rents from large financial institutions. Data indicates more underbanking in countries with lower income and more regulation. This article looks at the barriers traditional financial intermediaries often face in less developed nations and then looks at how fintech and cryptocurrencies enable bank alternatives to lower barriers to entry and expand financial inclusion.

Keywords: Fintech; Bitcoin; Financial intermediation; Unbanked; Forex; Economic theory of regulation; Deregulation; Financial services; F65; G18; G21; K24 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/s11127-023-01090-9

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