How disruptive is financial technology?

2026-01-20

Research Policy

AI Summary

This study examines whether fintech exerts a disruptive impact on traditional banking by intensifying deposit competition and thereby raising banks’ funding costs. Leveraging the exogenous variation induced by state-level policy changes in the U.S. that lifted investment restrictions on marketplace lending platforms, the authors employ a difference-in-differences design to identify the causal effect of fintech entry on bank deposit costs. The findings reveal that small financial institutions experience an approximately 11.5% increase in deposit costs, which nonetheless mitigates liquidity outflows. In contrast, larger, geographically diversified banks are better able to buffer competitive pressures by attracting deposits across regions. This paper provides the first evidence based on an exogenous regulatory shock of the unintended consequences of fintech on the liability side of banks, offering novel insights for regulatory design and risk management.

Technology Category

• Machine Learning: Privacy
• Reasoning under Uncertainty: Stochastic Optimization
• Intelligent Robots: State Estimation

Application Category

• Economics, Online Markets and Human Computation: The sharing economy
• Security and Privacy: Privacy-enhancing technologies
• Responsible Web: Human-perceived consequences of algorithmic deployment on the web

Problem

• Fintech
• banking sector
• deposit competition
• disruption
• financial technology

Innovation

• Fintech disruption
• difference-in-differences
• deposit competition
• bank liquidity
• geographic diversification