Traditional Financial Institutions Research Articles

The influence mechanism of internet finance on residents’ online consumption

This study investigates the impact of Internet finance (IF)11Internet finance (IF): Traditional financial institutions and Internet enterprises use Internet technology and information communication technology to realize the new financial business model of financial financing, payment, investment and information intermediary services.on residents’ online consumption using annual data from 2013 to 2022 in China. To examine the impact of IF on overall consumption, survival, development, and enjoyment, four vector autoregressive models are constructed. This study employs comprehensive methods, including parameter estimation, impulse response function analysis, and variance decomposition. Findings reveal that the development of IF has significantly stimulated residents’ online consumption, with the increase in developmental expenditure being the most significant, followed by the increase in entertainment expenditure.

Constructing a Composite Index: Assessing Digital Financial Inclusion in India

Financial inclusion has been an essential area of focus of the modern-day government. Financial inclusion means providing financial services to each section of society that demands it at an affordable cost. Nowadays, along with the efforts made by traditional financial institutions, the amalgamation of digital technology with finance, called digital finance, has significantly improved the base and coverage of financial inclusion. In India, the coverage of financial services has expanded after the introduction of the JAM (Jan Dhan- Aadhar- Mobile) trinity and the Unified Payment Interface (UPI). The increased internet penetration in the country has also expanded the scope of digital financial services. During demonetisation and the Covid-19 pandemic, digital financial services became a saviour for people and got a boost in its growth in India. The focus of this paper is to measure the level of digital financial inclusion in India. We have constructed a Digital Financial Inclusion Index for India using Principal Component Analysis (PCA). We have included the ‘Access’ (covers the supply side) and ‘Usage’ (covers the demand side) dimensions for this. The data from RBI and the National Payments Corporation of India (NPCI) has been used for the study. The study stresses the increasing role of digital finance in financial inclusion in India. This will guide the policy formulators to take key steps to improve the financial inclusion levels to achieve the goal of sustainable economic growth.

Trust in context: The impact of regulation on blockchain and DeFi

AbstractTrust is a key resource in financial transactions. Traditional financial institutions, and novel blockchain‐based decentralized financial (DeFi) services rely on fundamentally different sources of trust and confidence. The former relies on heavy regulation, trusted intermediaries, clear rules (and restrictions) on market competition, and long‐standing informal expectations on what banks and other financial intermediaries are supposed to do or not to do. The latter rely on blockchain technology to provide confidence in the outcome of rules encoded in protocols and smart contracts. Their main promise is to create confidence in the way the blockchain architecture enforces rules, rather than to trust banks, regulators, and markets. In this article, we compare the trust architectures surrounding these two financial systems. We provide a deeper analysis of how proposed regulation in the blockchain space affects the code‐ and confidence‐based architectures which so far have underwrote DeFi. We argue that despite the solid safeguards and guarantees which code can offer, the confidence in DeFi is still very much dependent on more traditional trust‐enhancing mechanisms, such as code governance, and antifraud regulation to address some of the issues which currently plague this domain, and which have no immediate, purely software‐based solutions. What is more, given the risks of bugs or scams in the DeFi space, regulation and trusted intermediaries may need to play a more active role, in order for DeFi to gain the trust of the next generation of users.

Exploring fintech innovations and their potential to transform the future of financial services and banking

This paper reviews the transformative potential of fintech innovations in reshaping the future of financial services and banking. The study critically examines how emerging technologies such as blockchain, artificial intelligence (AI), machine learning, and digital payment systems are disrupting traditional financial models and creating new opportunities for financial inclusion, operational efficiency, and enhanced customer experience. Through an extensive review of existing literature and industry reports, the paper identifies key trends and innovations within the fintech sector that are poised to redefine the banking landscape. The findings reveal that fintech innovations are significantly influencing customer expectations, regulatory dynamics, and competitive pressures in the financial industry. These technologies are driving the development of personalized financial products and services that cater to a broader demographic, including the underbanked and unbanked populations. The paper also discusses the challenges faced by traditional financial institutions in adapting to these changes, particularly the need for technological agility, regulatory adaptation, and the cultivation of consumer trust in digital platforms. The review underscores that fintech innovations have the potential to revolutionize the financial services industry, paving the way for a more inclusive, efficient, and customer-centric financial ecosystem. However, the successful integration of these technologies will require careful navigation of the associated regulatory, technological, and ethical challenges.

The Evolution of Digital Banking: Impacts on Traditional Financial Institutions

The Evolution of Digital Banking: Impacts on Traditional Financial Institutions

On the issue of decentralized finance (DeFi) mechanisms and the impact of DeFi on traditional financial institutions and the development of financial relations

On the issue of decentralized finance (DeFi) mechanisms and the impact of DeFi on traditional financial institutions and the development of financial relations

Beyond the Financial Horizon: A Critical Review of Social Responsibility in Latin American Credit Unions

Credit unions in Latin America play an important role in the financial system, making a significant contribution to the achievement of the Sustainable Development Goals (SDGs) through their focus on financial inclusion, sustainability, and economic resilience. Assessing the social responsibility of these cooperatives ensures ethical, sustainable operations that benefit the population. Unlike traditional financial institutions, cooperatives are based on principles focused on mutual benefit, democratic participation, and responsibility toward their members and the community. This critical literature review, conducted through scientific databases, synthesizes findings on social responsibility in credit unions. The financial system is relevant for global economic stability and growth, comprising institutions like credit unions that facilitate capital flow. It operates through financial instruments, intermediaries, and markets, ensuring efficient resource allocation and risk management. Effective financial management involves planning, organizing, directing, and controlling resources to achieve stability and growth, integrating social responsibility. Credit unions in Latin America highlight cooperative principles, emphasizing member service, community development, and sustainable practices over profit maximization, thereby fostering economic inclusion and ethical business practices. In conclusion, credit unions provide affordable financial services while promoting values of solidarity and equity. However, as entities directly linked to communities, it is essential for them to monitor their actions in terms of social responsibility. This is important to measure and ensure their impact on society and its context. Finally, future research should focus on balancing economic viability with social responsibility, exploring innovative models, governance frameworks, and technological impacts.

Crowdlending, Self-Employment, and Entrepreneurial Performance

Access to finance is crucial for sustaining entrepreneurial activity. Elaborating on resource dependence theory, we argue that the adverse impact of a loan rejection by a crowdlending platform is more severe than that of a rejection by a traditional financial institution. The data indicate that a failed crowdlending loan attempt is associated with a 14.80% increase in the probability of transitioning out of self-employment. This effect is 1.62 times that of revolving lines of credit and 3.08 times that of non-revolving lines of credit. We highlight that these effects are amplified for marginal borrowers and credit- and income-constrained entrepreneurs. In addition, we show that successful crowdlending enhances self-employed individuals’ future income and future access to traditional lines of credit. Implications for policy and practice are discussed.

An Overview of the Roles and Functions of Selected Financial Role Players to Protect Financial Stability and Promote Market Integrity in South Africa

The South African Reserve Bank (SARB) and other financial role players such as the Prudential Authority (PA), the Financial Sector Conduct Authority (FSCA), the National Credit Regulator (NCR), the Financial Intelligence Centre (FIC), the Financial Stability Oversight Committee (FSOC), the Financial Sector Contingency Forum (FSCF), the Financial Sector Council of Regulators (FSCR) and the Financial Sector Inter-Ministerial Council (FSIC) play a significant role in the protection and promotion of financial stability and market integrity in South Africa. The SARB has the primary financial stability mandate, whilst the FSCA was established to primarily promote market integrity and enhance market efficiency through protecting and promoting the fair treatment of financial customers and promoting financial literacy programs. As technology advances and new players enter the market, traditional financial institutions are faced with increased competition and the need to adapt and innovate to stay relevant. In this regard, regulatory frameworks and the functions of regulatory bodies should be constantly reviewed to conform to financial technology (fintech) developments and safeguard consumer interests. This article examines the roles and functions of the aforementioned financial role players as regulated by the Financial Sector Regulation Act (FSR Act) and other relevant financial sector laws. This is done to evaluate the effectiveness of their roles and functions to protect and promote financial stability and market integrity in line with fintech and Artificial Intelligence (AI) developments. The paper also evaluates the importance of cooperation and collaboration between the financial role players to fulfil their roles and functions.

Examining the Impact of Cryptocurrencies on the Traditional Banking System: A Review

This study delves into the effects of cryptocurrencies on the conventional banking sector, with a specific focus on their impact on different facets like financial inclusivity, transaction effectiveness, regulatory hurdles, and financial robustness. Through an examination of current data and scholarly works, this paper presents an all-encompassing evaluation of how cryptocurrencies are restructuring the financial environment. The examination underscores the advantages and challenges that cryptocurrencies bring to the established banking entities. The studies suggest among others that; Traditional financial institutions should embrace technological innovation by incorporating blockchain technology into their operational processes, engage in collaborations with regulatory bodies to establish coherent and efficient regulatory frameworks for cryptocurrencies as well as actively engage in discussions and pilot programs revolving around Central Bank Digital Currencies (CBDCs). Collaborating with central banks to develop and implement CBDCs will ensure their seamless integration into the current financial landscape.

Research on the Coordinated Development of Inclusive Finance and Financing for Small and Medium-sized Enterprises

As an important force in promoting economic and social development, small and medium-sized enterprises play a crucial role in enhancing China’s economic strength, creating employment opportunities, and promoting industrial structural transformation. However, due to their inherent weaknesses, small and medium-sized enterprises often face difficulties in financing within the traditional financial service system. This makes it difficult for small and medium-sized enterprises to inject vitality into the development of the market economy by expanding their financing scale. Since 2013, China has vigorously developed inclusive finance and extended the services of traditional financial institutions to small and medium-sized enterprises, providing policy guidance, resource support, and technical support to alleviate the financing difficulties of small and medium-sized enterprises. Based on this, this article focuses on the current financing problems faced by small and medium-sized enterprises and specifically elaborates on how to lower the financing threshold for small and medium-sized enterprises and broaden their financing channels through inclusive finance, in order to promote the development of inclusive finance and a virtuous cycle of financing for small and medium-sized enterprises.

New Sustainable Fintech Business Models Created by Open Application Programming Interface Technology: A Case Study of Korea’s Open Banking Application Programming Interface Platform

Fintech facilitates financial inclusion by introducing new sustainable and accessible business models in developing countries. Open banking API technology is used by various fintech businesses in both developing and developed countries, with varying effects on financial markets. It changes the financial market distribution structure by separating financial product manufacturing and distribution and intensifying competition between traditional financial institutions and fintech companies. Fintech companies innovate by using this tool to create new business models. In December 2019, Korea established a standardized “open banking API platform”, sharing an interbank payment network with fintech companies. It has since shown explosive growth, surpassing the trading volume of the UK, the country that introduced open banking APIs for the first time. This study analyzes new business models fintech companies created using this API technology. Based on existing literature, statistics from the platform operator (the Korea Financial Telecommunications and Clearings Institute), and investigations of 30 Korean fintech mobile applications, this study analyzes new fintech business models that provide financial services using this platform. These companies create sustainable business models by combining multiple APIs. Four representative business models (simple funds transfer, simple payment, cross-border remittance, and asset management) are analyzed to reveal how fintech companies create business models with open APIs.

Integrating Risk Management in Fintech and Traditional Financial Institutions through AI and Machine Learning

Integrating Risk Management in Fintech and Traditional Financial Institutions through AI and Machine Learning

Real-time financial monitoring systems: Enhancing risk management through continuous oversight

The rapid evolution of financial technology has introduced complex risks that challenge traditional risk management frameworks, necessitating innovative solutions. This review paper aims to examine and synthesize existing research on real-time financial monitoring systems that use advanced AI and ML technologies to enhance risk management through continuous oversight. The focus includes traditional financial institutions and fintech companies across various regions to address disparities in risk management capabilities. The reviewed studies span five years, from 2018 to 2023, incorporating transactional records, compliance reports, and stakeholder surveys, providing a comprehensive informational and statistical basis. Using a mixed-methods approach that includes qualitative interviews and quantitative data analysis, the literature confirms that real-time monitoring systems significantly improve risk detection accuracy and operational efficiency. Specifically, the studies show a reduction in fraud incidents by 35% and an improvement in credit risk assessment accuracy by 25%. These findings indicate enhanced predictive capabilities and faster response times to emerging threats. The conclusions drawn are relevant for financial institutions, regulators, and policymakers aiming to improve risk management practices and compliance standards. The potential for further application includes broader adoption of real-time systems across the financial sector, ensuring enhanced stability and security in the face of evolving digital threats.

AN APPRAISAL OF THE REGULATION OF DIGITAL BANKS IN NIGERIA

The advent of the computer age saw industries across the world hopping on the Information and Communications Technology train in a bid to survive. The financial industry is no exception, having since incorporated Information and Communications Technology in its operations. Traditional financial institutions like banks now utilize technology to render financial services to their customers. Aside the traditional banks, a new class of banks called digital banks has emerged in recent times in Nigeria, examples include Kuda, Aladdin, and VBank. These banks operate without a physical banking hall and render their services digitally. Although digital banks were not originally included in Nigerian laws, these banks now have the backing of the principal legislation regulating banks in Nigeria: the Banks and Other Financial Institutions Act 2020, hence solidifying their place in the Nigerian financial sector. With the aim of evaluating the effectiveness of the extant legal framework for digital banks in Nigeria, this paper explored the evolution of banking in Nigeria, the emergence of digital banks, the pros and cons of such banks as well as the existing legal framework for digital banks in Nigeria. The research methodology adopted is the doctrinal research methodology and primary sources like statutes, guidelines and case laws as well as secondary sources like textbooks and journals were utilized. The paper found that the existing legal framework for digital banks in Nigeria is fragmented and does not sufficiently address the uniqueness of these banks. It recommended the development of a comprehensive legal framework for digital banks in Nigeria, which incorporates a licensing regime solely for digital banks.

The Impact of Fintech Startups on Financial Institutions’ Performance and Default Risk

Introduction: It is highly important to understand the role of financial technology-based startups in the field of financial support. Thus, the study here aimed to investigate the job of fintech solutions or startups in the performance management of financial institutions and the process they use to mitigate risk in financial matters. Literature Review: The economic contraction was most likely the cause of the decline in the value of investments. Understanding the importance of operational efficiency, traditional financial institutions have embraced technology advancements to automate repetitive tasks, lower errors, and save costs. As a result, overall performance and cost-effectiveness have increased. Methodology: The method of data collection that has been selected to investigate the roles that fintech startups play in reducing financial risk is "primary quantitative." As a result, answers to a questionnaire consisting of 13 questions were gathered from 55 people. Findings and analysis: The statistical analysis revealed that the majority of responses were either in agreement or strongly in agreement. Given that the Pearson Correlation value is greater than 0.8, there is a strong correlation between each variable. Every hypothesis formulated during the initial stage of the study has been approved. Discussion: Fintech, which is a combination of finance and technology, uses cutting-edge methods and instruments to improve the overall effectiveness and resilience of risk management frameworks. However, fintech startups face a variety of obstacles along the way, but they are also presented with opportunities for innovation and growth on their optimization journey Conclusion: The adoption of fintech by financial institutions is expected to create a dynamic risk management landscape that can adjust to new opportunities and challenges in the constantly changing financial sector. The primary quantitative method was selected in order to collect the pertinent data for this investigation. Through statistical analysis, the gathering of quantitative data can assist in projecting real-time information.

FinTech and financial development: the role of traditional financial institutions

PurposeThis paper employs data from the World Bank to examine the effect of traditional banks on FinTech and financial development in the Southern African Development Community (SADC) region.Design/methodology/approachThe study employs the Generalized Method of Moments (GMM) as the primary data analysis method.FindingsThe findings of the study demonstrate a bi-directional relationship between traditional financial institutions and FinTech. Traditional financial institutions are observed to facilitate the adoption of FinTech solutions, whilst the disruptive effects of FinTech incentivize traditional banks to adapt to the changing financial landscape and tailor their service and product offerings to reflect recent technological advancements. Consequently, there exists a positive relationship between traditional financial institutions and financial development in the SADC region.Practical implicationsOur findings suggest the need for market liberalization and enhanced institutional quality controls for policymakers. Traditional banks must adapt their business models and incorporate FinTech solutions to remain competitive and relevant. Collaborative partnerships between traditional banks and FinTech firms have emerged as a practical approach to leverage the strengths of both sectors.Originality/valueThis is one of the first studies to examine the role of traditional financial institutions in FinTech and financial development using GMM in the SADC region.

Identifying systemic risk drivers of FinTech and traditional financial institutions: machine learning-based prediction and interpretation

ABSTRACT We study systemic risk drivers of FinTech and traditional financial institutions under normal and extreme market conditions. We use machine learning (ML) techniques (i.e. random forest and gradient boosted regression trees) to evaluate the role of macroeconomic variables, firm characteristics, and network topologies as systemic risk drivers and perform the ML-based interpretation by Shapley individual and interaction values. We find that (i) the feature importance in driving systemic risk depends on market conditions; namely, market volatility (MVOL), individual stock volatility (IVOL), and market capitalization (MC) are positive drivers of systemic risk under extreme (downside and upside) market conditions, while under normal market conditions, institutions with high price-earnings ratio, large MC, and low IVOL play an essential role in stabilizing markets; (ii) macroeconomic variables are the most important extreme systemic risk drivers, while firm characteristics are more important under normal market conditions; and (iii) the interaction between IVOL and MC or MVOL is the significant source of extreme systemic risk, and MC is the most crucial interaction attribute under normal market conditions. The interactions between macroeconomic variables are the most prominent in systemic risk under different market conditions.

The Impact Of Fintech Innovations On Traditional Financial Institutions, Financial Inclusions, and Payment Systems – A Review Of Case Studies

Fintech (monetary innovation) advancements have been reshaping the monetary scene, altering the manner in which individuals access monetary administrations, go through with exchanges, and deal with their funds. It has fundamentally disturbed the customary monetary scene, it are conveyed and experienced to change the way monetary administrations. Fintech startups have pushed traditional financial institutions to change and improve their services in order to remain competitive with agile, customer-focused solutions. Fintech has revolutionized payment systems simultaneously by introducing digital payment methods and making cross-border transactions easier, reducing cash-based systems' reliance. Most importantly, fintech has increased financial inclusion by enabling individuals and small businesses to participate more actively in the formal economy by providing formal financial services to previously underserved populations via mobile platforms. While the extraordinary effect of fintech is apparent, policymakers and partners should address administrative intricacies and network protection dangers to guarantee supportable and comprehensive monetary environments. This article looks at the extraordinary effect of fintech on customary monetary foundations, installment frameworks, and monetary incorporation. By breaking down different literary works and contextual analyses, the specialist attempts to investigate how fintech has disturbed conventional practices, further developed productivity, and cultivated more noteworthy monetary incorporation around the world. IndexTerms - Fintech, computerized installments, monetary environment, network safety, monetary consideration, artificial intelligence, man-made consciousness, information security, risk.

Shadow Banking in the United States: Emerging Factors, Operation Modes and the Current Situation of Supervision - Based on the Comparison with Chinese Shadow Banking System and Market

In 2009, Ben Bernanke, chairman of the Federal Reserve, described shadow banking as a financial intermediary that converts savings into investments in addition to regulated deposit-taking institutions. To put it simply, the essence of shadow banking is a financial innovation that breaks through traditional financial institutions in order to maximize profits in the financial market environment. In this paper, we compare the U.S. and Chinese shadow banking system and their market system. From that, we analyze their similarities and differences from the aspects of emerging factors, classification and scale, and operation mode. Based on the above analysis, we then discuss the current situation of supervision of shadow banking in the United States and find that the U.S. shadow banking is negligent in institutional constraints and has practical difficulties in legal supervision. Finally, we put forward some suggestions on the future development and financial structure optimization of shadow banking.