Publication: Fintech and the Digital Transformation of Financial Services: Implications for Market Structure and Public Policy
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Date
2022
ISSN
Published
2022
Author(s)
World Bank
Abstract
This note examines the implications
of digital innovation for market structure and attendant
policies, including financial and competition regulation.
There have been several surveys of regulatory responses.
This note takes a step back, to look at what the economic
theory of banking and financial intermediation can tell us
about how technology may drive industrial organization in
the sector, and how that might inform further policy
responses. The paper roots the impact of the digital
transformation of finance in innovations that have enabled
providers to address long-standing challenges of financial
intermediation, including asymmetric information,
uncertainty, incomplete markets, and fixed and variable
costs of production. The paper describes how digital
innovation affects these key economic frictions in finance
and alters the financial services value chain and industrial
organization. The forces driving these changes, and
potential outcomes in terms of industry structure, lead to
insights for policy makers on how to harness the benefits of
fintech, while mitigating some of the risks, particularly
around competition and market structure. The focus is on
economic and technological forces that apply broadly across
financial services. It recognizes that the sector
encompasses a wide range of different products and services
and is composed of numerous sub-markets that might use
different technologies or have different economic
structures. These may thus diverge in market structure and
competition outcomes.
Citation
“World Bank. 2022. Fintech and the Digital Transformation of Financial Services : Implications for Market Structure and Public Policy. © Washington, DC. http://openknowledge.worldbank.org/handle/10986/37340 License: CC BY 3.0 IGO.”