From Competitors to Partners: Banks’ Venture Investments in Fintech

Manju Puri, Yiming Qian and Xiang Zheng

No 33297, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We hypothesize and find evidence that banks use venture investments in fintech startups as a strategic approach to navigate fintech competition. We show that banks’ venture investments have increasingly focused on fintech firms in systematic ways. We find that banks facing greater fintech competition are more likely to make venture investments in fintech startups. Banks target fintech firms that exhibit higher levels of asset complementarities with their own business. Finally, instrumental variable analyses show that venture investments increase the likelihood of operational collaborations and knowledge transfer between the bank investor and the fintech investee.

JEL-codes: G21 G24 (search for similar items in EconPapers)
Date: 2024-12
New Economics Papers: this item is included in nep-cfn, nep-pay and nep-sbm
Note: CF
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