Research on risk contagion mechanism of big fintech based on the SIRS model

Yutong Li, Zhongming Tan and Chenyu Huang

PLOS ONE, 2023, vol. 18, issue 9, 1-15

Abstract: In recent years, while the relationship between the new financial institutions, represented by financial technology companies, and the traditional financial institutions(banks, securities, insurance, etc.) has been steadily enhanced, a New Relational Network has silently emerged. Along with the rapid expansion of big fintech companies, the possibility of financial risk breeding and spreading in the New Relational Network is also rising. This article analyzes and simulates the risk contagion mechanism of big fintech risks based on the SIRS epidemic model. The study’s findings imply that: when the number of big fintech companies infected with risk exceeds the risk threshold, the big fintech risk will spread in the New Relational Network. At this time, the number of big fintech companies infected with risk can be reduced below the threshold by enhancing the risk warning, risk management, risk buffering and blocking capabilities, and timely improving risk prevention and control measures in the post-infection phase. It means that the big fintech risk is controlled. For big fintech risks, proactive interventions are more effective than post-incident response measures. This paper makes the following recommendations for preventing big fintech risks: creating a risk monitoring and early warning system to raise the Big Fintech companies’ direct immunization rates; strengthening the big fintech companies’ risk management and risk mitigation capabilities; enhancing the internal and external supervision to achieve sustainable development of big fintech companies.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:plo:pone00:0291230

DOI: 10.1371/journal.pone.0291230

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