Quantitative Research Methods for Finance
Abstract
The aim of the study was to examine the manner in which the Fintech industry impact on the banking business models .The examination was done in terms of revenue generated by the banking industry through transactional fee, offering financial advice, and interests as a result of influence from Fintech industry. Moreover, the study also focused in making a review of the increasing theoretical as well as the empirical studies that have strived to make an examination of the range as well as the magnitude in which the Fintech industry impact on the banking business models.
The study utilized the casual research design. The target population of the study was the 40 commercial banks in the US. Secondary sources was also employed in the collection of the data relating to the transactions involving the mobile payment, total financial assets, earnings before tax, and the number of account users on the registered mobile payment.
The analysis on the unit period as well as the longitudinal study was on quarterly basis. The data collection was on 20 quarters beginning from 2015 July to 2020, December. Multiple linear regression equation as well as the correlation analysis was applied with the employment of the ordinary least squares as the estimation technique. The main reason for utilizing these techniques was to find out the relationship of the Fintech Industry and the banking business models.
The study revealed that there is a positive relationship between the predictor variables included in the research and the return on assets of the banking models after the conduction of the correlation analysis with a 0.0000 significance value. The significance value between these variables was 0.000 which was greater than 0.05 which is the critical value (alpha).The variables also had a t-value of 4.556 which is out of range of the T test critical value of ± 2.05423.The obtained coefficient was the implication of the fact that every unit increase of the registered account users on mobile payment would lead the increase in the performance by the banks by about 1.205.The study therefore, came to conclusion that the increased mobile payments uptake would result to an increased financial performance by the banking business models and therefore, existence of the positive relationship.
Moreover, the study concluded that the Federal Reserve System should recognize the role played by the Fintech Industry in the banking sector and incorporate it in the financial system if possible while at the same time setting the regulatory framework of the same.
The additional recommendation include the fact that the managers of the banking institutions should utilize the findings in this study to create a proper connection between the services offered by the Fintech Industry and the specific banking institutions in order to make sure that the banking sector will not lose the market share. Moreover, the investors are encouraged to increase their investment in the banking stock as this would aid to push the financial performance of the banks upwards with the aid of the Fintech Industry.
Introduction
The intensity of the effect of the Fintech industry to the business banking models has largely been felt for the last five years. The study therefore, intends to find out their development and growth and their effect on the business banking models. Fintech industry manifests high welfare-supplementing abilities to business firms and individuals but can be disruptive to the banking sector if adequate regulation is not put in place to ensure that the new technology outcomes are attained with no interference to the financial stability of the banking firms.
According to Frost (2020), Fintech may be defined as the financial services automation with the utilization of the innovative news as well as the coming up of new business models due to the use of the big data that has given the Fintech the scope of interrupting the already existing financial intermediaries such as banks. The big data could be connected with the algorithms of the Artificial Intelligence that derives power from computing .The utilization of the new techniques often results in outcomes such as lower financial intermediation costs and the improvements of the products for the consumers (Frost, 2020)
In spite of the high banking adoption into the digital era, Fintech firms are slowly infiltrating into their past forms of business. The possible benefits of the Fintech Industry is their capacity of utilizing the current rigidity of the bank millennial by offering the digital services that attract the youth. Traditionally, banks were interested in the products as compared to the Fintech industry that is more interested in what they offer to the customers (Hari Krishna and Arun Kumar, 2020).
The role of the Fintech industry in enhancing the financial performance through the utilization of the digital platforms cannot be underestimated .Fintech firms uses the new technology while competing with the financial institutions such as banks as they act as intermediaries in delivering of the financial services. The US market has demonstrated that it has all the necessary requirements for developing financial systems through the growth of the Fintech industry. In this case the financial systems include the business banking models. Fintech firms enjoy cost effective operations and therefore have a competitive edge as they have fewer regulations as compared to the banks and can therefore, stretch to enhance the performance of the business banking models.
The venturing in of the Fintech firms in the US financial market was due to the untapped financial market by the US banks. Fintech industry has therefore brought about increased competition in the banking sector therefore, causing the improved performance of the business banking models.
This study will therefore, examine the effects of the Fintech industry on the banking models while answering the following research questions;
- Do Fintech technologies help the financial institutions to enhance the efficiency of services and customer satisfaction?
- How do Fintech systems impact on the current business banking models?
- What are the risks associated with the adoption of the Fintech IT systems
