Relationship between Fintech companies and growth and banks listed in NASDAQ

Abstract

The financial sector witnessed significant events, such as the 2009 economic crisis. Such events reshaped the financial landscape and led to expanding a particular type of company called FinTech. FinTech stands for financial technologies. FinTech companies are identified as relatively new actors in the financial sector, and their relationship with other actors such as banks becomes significant. Due to the nature of their activities, FinTech companies are assumed to be disruptors of traditional banks. Recent studies have used several methods, such as market share analysis, to examine the relationship between FinTech and banks. This study investigated the relationship between FinTech growth and bank growth using data available in financial statements. It analyses the disruptive nature of FinTech through the lenses of Schumpeter’s creative destruction theory and Christensen’s disruptive innovation theory. A quantitative mono-method with a deductive approach was used as a methodology in this study. Four indicators (revenue, total assets, cash flows allocated to investment, and employee number growth) for both banks and FinTech were used in this study. Due to the limited number of data points, nonparametric tests (Mann-Whitney U test and Spearman’s Rho correlation) were used to answer the research questions. The results showed significant correlations between FinTech growth and bank growth. In particular, FinTech revenue growth is significantly correlated to bank total assets growth. There was also a significant correlation between the investment cash flow growth of FinTech and the investment cash flow growth of banks. The main implication of these findings is that although FinTech is a disruptive innovation, the disruption has not yet happened.