The effects of open banking on fintech providers: evidence using microdata from Spain

Andrés Alonso-Robisco, José Manuel Carbó, Pedro Jesús Cuadros-Solas and Jara Quintanero
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Andrés Alonso-Robisco: BANCO DE ESPAÑA
José Manuel Carbó: BANCO DE ESPAÑA
Pedro Jesús Cuadros-Solas: CUNEF UNIVERSIDAD AND FUNCAS
Jara Quintanero: BANCO DE ESPAÑA

No 2514, Working Papers from Banco de España

Abstract: Open banking initiatives, which aim to increase competition and innovation in the financial sector by enabling the customer-authorised sharing of financial data among banks, regulated third-party providers and other financial stakeholders, are becoming widespread around the world. This paper investigates the impact of open banking on the development of the fintech sector, focusing particularly on payment-related financial services. We utilise the implementation of the Second Payment Services Directive (PSD2) in Europe as a natural experiment and employ a difference-in-differences methodology to analyse a unique microdata set of 406 Spanish fintech firms from 2014 to 2022, sourced from the Banco de España Central Balance Sheet Data Office and Fintech Radar. Our findings reveal that following PSD2, fintech firms specialising in payment services (Paytech) improved their performance compared with non-payment fintechs (control), with this improvement driven primarily by revenue growth rather than cost reduction. Additionally, treated fintech firms exhibited a significant reduction in long-term bank debt reliance, securing more stable market-equity funding. We also find that Paytech firms increased their liquidity holdings, reduced their labor intensity while increasing their labor costs and enhanced their productivity. Our results contribute to the literature on open banking by providing empirical evidence of its benefits for fintech firms, particularly in the payment sector, and underscore the importance of regulatory frameworks in fostering innovation and competition. These insights are valuable for policymakers aiming to enhance financial sector dynamics through data-driven regulations.

Keywords: open banking; fintech; payments; PSD2 (search for similar items in EconPapers)
JEL-codes: C63 G23 L22 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2025-02
New Economics Papers: this item is included in nep-pay and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:2514

DOI: 10.53479/39138

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