Abstract
After the 2007–08 global financial crisis, research flourished on entrepreneurship through digital innovation in the financial market as well as on investors’ influence on digital technology-based entrepreneurs’ funding decisions. This study combines these two research streams to analyze the decision-making criteria for funding financial technology companies (fintechs), hybrid companies that combine digital entrepreneurship, technology, and banking. The study first uses prior literature to derive important characteristics to define fintechs and then uses 12 expert interviews to elaborate on decision-making criteria in funding. Except for smaller peculiarities, fintech funding does not appear to differ from that of other digital entrepreneurship in different markets, and—as with most digital business models—scalability was identified as a key criterion. Additionally, by serving as a major provider of money for young companies, banks have changed their role and positioning in funding new financial technology entrepreneurs. Through developments in digital technology, banks have shifted from traditional money-lending activities (i.e., debt-financing) to becoming stakeholders in fintechs and, hence, equity investors. We also describe how these formerly distinct fields have converged due to regulatory requirements, digital newcomers, and a need for constant innovation, with their future sustainable development dependent on sharing and collaboration.
Highlights
In the previous decade, traditional banks have struggled to maintain their market and have faced competition from an increasing number of financial start-ups—an issue of the greatest interest to investors [1]
Following the definition of Arner et al [7], this study examines the “Fintech 3.0” phenomenon that began after the 2007–08 global financial crisis [7,14]
All relevant criteria in terms of investor decision-making and defining fintechs expert inwteerrevcieowllesc.teAdlilnrtehleevliatenrtatcurrieterreivaieiwn,twerhmicshowfaisnuvseesdtotor cdreecaitseiaongu-midaekfoinr gthaenindtedrveifienwisn. g fintechs were collected in the literature review, which was used to create a guide for the interviews
Summary
Traditional banks have struggled to maintain their market and have faced competition from an increasing number of financial start-ups—an issue of the greatest interest to investors [1]. These financial technology companies (fintechs) are gaining momentum, fueled by drivers such as the sharing economy [2,3], and include peer-to-peer lending platforms that have opened marketplaces for multiple economic actors and enabled the co-creation of value as Uber has for cars [4,5]. This paper first describes the results from the literature review and the interview methodology before discussing the empirical results, limitations, and suggested directions for future research
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