SFiC is the first interdisciplinary research centre to focus on financial technology (FinTech) and financial innovation.
Financial Technology (FinTech)
Financial Technology (FinTech) is the future of the Finance industry. New digital technologies have begun to disrupt banking and insurance markets and will continue to shape the financial sector over the coming years. The FinTech revolution was sparked by the introduction of crowdfunding and alternative sources of finance, and has grown to include multi-billion marketplaces where individuals and businesses source credit from investors. A key advantage of digital marketplaces over traditional financial intermediaries is providing faster and cheaper access to credit, which enables start-up and business growth.
This research theme embodies the effects of different types of crowdfunding (equity-based and reward-based), and issues related to how the nascent FinTech sector influences the banking industry, financial institutions and regulatory bodies. Understanding how the rapidly expanding FinTech industry affects these sectors, and consumer welfare, are top priorities for the design of regulation.
The banking and finance sector is Birmingham has witnessed a remarkable growth over the past few years (second largest Business, Professional and Financial Services sector outside London). The size of Birmingham’s banking sector is 10,700 employees in 230 companies. FinTech has become a recent trend with 7,500 tech firms employing over 40,000 people; boosting the economy by £2.3 billion every year; in sum (WMGC).
This research theme includes environmental and green finance. Motivated by the threat of climate change the Bank of England governor Mark Carney and François Villeroy de Galhau, governor of the Banque de France, state, “If some companies and industries fail to adjust to this new world, they will fail to exist
”. The visible, catastrophic, effects of climate change have been observed in recent Californian wildfires, typhoons in south-east Asia and droughts in Africa and Australia. These episodes have devastated infrastructure, ruined natural habitats and inflicted suffering on our collective wellbeing. Governments have sought to alleviate the effects of climate change through the Paris Agreement. Part of this strategy focuses on climate-related financial risks that mitigate and limit the rise in global temperatures. This requires policymakers and prudential supervisors to instigate changes in governance and regulation to ensure companies comply with the requirements of the green and low-carbon economy.
Research on sustainable and ethical finance has implications on risk management, governance and financial institutions. For example, integrating sustainability into their own portfolio management in addition to disclosure. This research theme is challenging, timely and urgent for regulators and financial institutions to continue to raise the bar to address these climate-related risks and to “green” the financial system. Sustainable finance research aligns with the overall strategy of BBS as it develops an agenda around Responsible Business.
Our Current Projects
This paper shows that banks’ cost of deposits increase following exposure to the Fintech sector. We exploit the exogenous, staggered removal of restrictions on investing through peer-to-peer lending platforms by US states. The entry of Lending Club and Prosper cause the cost of deposits to increase by approximately 11% as banks face more intense competition for deposit funds. Banks’ liability structure also shifts towards greater reliance on non-deposit funding. The findings provide regulatory insights into the unintended consequences, and potentially destabilizing effects, of the nascent Fintech sector on the banking industry.
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