Abstract
Framework: Financial Technology (FinTech) is an industry composed of diversified firms that combine financial services with innovative technologies. The research question and main goal are attempting to answer whether they are more similar to traditional banks or trendy technological firms deploying their innovativeness to favor financial inclusion and sustainability. Justification: Evaluators may wonder if FinTechs follow the typical evaluation patterns of bank/financial intermediaries or those of technological firms. Preliminary empirical evidence shows that the latter interpretation is the one consistent with the stock-market mood. Objective: This study goes beyond the extant literature, analyzing the differences between FinTechs and traditional banks in market valuation, and showing the potential for digital interaction and cross-pollination of complementary business models. Methodology: The differences will be empirically analyzed with the stock market valuation and the multipliers associated with these firms. Results: The main contribution of this paper is that the appraisal approaches of FinTechs follow those of technological startups, having a revenue model much more scalable than that of a typical bank. FinTechs may so provide a solution for sustainable finance with microfinance and crowdfunding among others. FinTechs and traditional banks may eventually converge towards a common market exploiting co-opetition strategies.
Highlights
The term “Financial Technology (FinTech)” denotes the firms that combine financial services with innovative technologies offered to financial service providers
FinTechs can so be assimilated to innovative startups
The main thesis of this study is that the evaluation of FinTechs follows appraisal approaches that are similar to those of technological startups and differ from those of the banks
Summary
The term “FinTech” denotes the firms that combine financial services with innovative technologies offered to financial service providers. In addition to offering products and services in the banking sector, some FinTechs distribute insurance and other financial instruments or provide third party services. FinTech is recognized as one of the most critical innovations in the financial industry and is evolving at a rapid speed, driven by the sharing and circular economy, favorable regulation, and information technology. FinTech promises to disrupt and reshape the financial industry by cutting costs, improving the quality of financial services, and creating a more diverse and stabler financial landscape. FinTechs foster technological innovation in financial services that could result in new business models, applications, processes, or products with a material effect on financial markets and institutions, and the provision of financial services [4]
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