Authors: Apostolos Dasilas

Title: The impact of FinTech firms on the UK bank performance

Abstract

In the last decade there is an explosive growth of online alternative lending. Advances in FinTech lending have changed the way consumers and small businesses secure financing. Nowadays, FinTech firms extensively use innovative technology to carry out tasks previously offered only by banks, such as lending, payments, or investments. The range of financial services (i.e. contactless and instant payments; asset management services; investment and financial service advice; and information and data management/storage) provided by FinTech firms is conjectured that has replaced many of the services provided by traditional banks. The main rationale is that FinTech firms can provide more accessible and less expensive financial services vis-à-vis traditional banks. Therefore, I hypothesize that FinTech growth will negatively influence bank performance. Using data from 123 UK banks and 229 FinTech firms between 2010 and 2019, I examine the hypothesis that the growth of FinTech firms negatively impacts bank performance. In contrast to the theoretical anticipation, the results show that the growth of FinTech firms positively influences bank performance in the UK. Employing multiple additional and robustness tests, the main conclusion that FinTech positively predicts bank performance holds.