The financial industry has been strongly influenced by digitalization in the past few years reflected by the emergence of “FinTech,” which represents the marriage of “finance” and “information technology.” FinTech provides opportunities for the creation of new services and business models and poses challenges to traditional financial service providers. Therefore, FinTech has become a subject of debate among practitioners, investors, and researchers and is highly visible in the popular media. In this study, we unveil the drivers motivating the FinTech phenomenon perceived by the English and German popular press including the subjects discussed in the context of FinTech. This study is the first one to reflect the media perspective on the FinTech phenomenon in the research. In doing so, we extend the growing knowledge on FinTech and contribute to a common understanding in the financial and digital innovation literature. These study contributes to research in the areas of information systems, finance and interdisciplinary social sciences. Moreover, it brings value to practitioners (entrepreneurs, investors, regulators, etc.), who explore the field of FinTech.
The world of finance, particularly the banking sector, is of undoubted importance to the daily lives of people worldwide. Traditional banking has changed significantly during the last century but, today, a new epoch of financial service, called “FinTech,” has emerged. This sector represents a challenging environment because it has barely been explored. There is no doubt that traditional financial technologies have undergone a huge transformation throughout the last decade, and the new types of financial technologies – FinTech – represent a currently innovative and emerging field, which has attracted attention from the media as well as investors. According to an Accenture report (Skan et al. 2015), the number of investments in FinTech companies and start-ups has risen dramatically within one year from USD 4.05 billion in 2013 to USD 12.2 billion in 2014. The amount of investment in the industry has almost doubled to USD 22.2 billion for the year 2015 (Skan et al. 2016). These figures demonstrate that the sector is highly visible in the world of finance and, therefore, provides fertile ground for further ingenious ideas and research. Moreover, FinTech brings new opportunities for individual empowerment, for example, by allowing transparency, reducing costs, or cutting middlemen and, even more importantly, by making information accessible. FinTech also affects banks that are cautious of being disrupted and that are attempting to jump on the FinTech train while observing the thousands of start-ups offering alternatives to traditional banking services. Although the term “FinTech” is in the limelight of public debate in the fields of business, finance, and innovation, its meaning is ambiguous for many people. This ambiguity is felt by experts in the FinTech field and the targeted external consumers who are observing this emerging field. One reason for the ambiguity could be the novelty and tremendous rapid rise of the FinTech industry. FinTech is a broad phenomenon that is evolving daily as more technology entrepreneurs enter the industry and transform it according to social needs. On the one hand, FinTech could be considered a financial service, which is intervened by innovative technologies to satisfy the requirements of tomorrow: high efficiency, cost reduction, business process improvement, rapidity, flexibility, and innovation (Dapp et al. 2014). On the other hand, FinTech also refers to companies – and, even more typically, to start-ups, which serve as enablers of these services. Currently, the term “FinTech” is ambiguous, and there is room for further discussion. We argue that elucidating on the antecedents of FinTech will aid practitioners in identifying the potential and threats associated with the phenomenon and researchers to unveil new possibilities for study on all aspects of FinTech (e.g., the supporting technologies, ecosystems, and organizational factors). The significance of the financial industry in economic growth emphasizes the role of financial innovation, which can be considered a new entity that involves the reduction of risks and costs or the provision of a product/service/instrument that meets the needs of involved parties better than existing options (Frame and White 2014). Considering the technological breakthroughs within the scope of financial services, the current climate invites reflection on the main FinTech subjects from the perspective of key media1 and industrial sources, which are naturally involved in specific societal discourses and frame the notion of FinTech accordingly. While a generous amount of research addresses the field of financial services and the banking sector, only a few scholars have touched on the FinTech industry. The context of research is broad today, and unexplored new horizons constantly emerge as new FinTech companies spring up like mushrooms overnight and reinvent the industry. This disruption is the motivation for our examination of how FinTech harmonizes and engages with the real world. Because the research on FinTech in the information systems (IS) research community is in its infancy and only a few studies address the subject, we assume an explorative and qualitative approach and base our analysis on the results of a review of scientific publications, professional reports, and articles from newspapers and magazines. Media discourses on the aspects of information technologies have drawn little attention from IS researchers (Cukier et al. 2009). However, we believe that the popular media is an important observer and reflector of the public consensus and plays an influential role. Therefore, we consider it worthy of researchers’ attention, and argue that this study is valuable for researchers in finance area (especially ones interested in financial innovation research) and interdisciplinary social sciences (such as media and business researchers). However, such an analysis remains a reflection of the reflection of the actual reality. The majority of the sources used in this study were obtained through research and newspaper databases from North America and the English and German-speaking countries in Europe.
Inspired by the explosion of media attention on FinTech, we present an overview of locations, people, their motives and intentions, organizations, and relationships, as well as central historical events that shape and underlie the phenomenon. Moreover, we identify central discourses around FinTech and its role in the current environment. Therefore, we set the following research question: What factors influence the perception of FinTech through the lens of the media, and how has this influence been changing over time? To address our research question and support our argument, we subdivide the research question and focus on two aspects to guide the reader through the analysis. These are the following:
(1)What are the primary factors that influence FinTech over time?
(2)What FinTech-related subjects are discussed in the press?
The contribution of this study is threefold. First, it contributes to the literature on financial and digital innovation by positioning FinTech within that context and identifying and analyzing the drivers motivating FinTech as perceived by the popular media. We analyze a range of sources and, based on this analysis, we reflect on the development of FinTech through the eyes of the press. This aids scholars who are attempting to define the starting point and a basis for their research on FinTech. Second, this study employs a methodological approach, which can be used to explore the new field in IS and reveal a consensus on the phenomenon obtained from social actors (the press in the case of this study). Third, the study also has practical implications. As a reflection of a socially constructed phenomenon, this study might appeal to entrepreneurs and investors who already focus their activities on innovative financial services or who are considering FinTech as a possible strategic direction. The main findings of this study unveils the drivers motivating FinTech over time. We argue that FinTech is rather an entrepreneurial phenomenon, which is not triggered by exclusively one and only driver of financial innovation, but rather is influenced by the combination of economic, technological and regulatory factors. We conclude that an emergence of FinTech in the media should attract attention of researchers and encourage to explore the area and contribute to its understanding from different perspectives. The remainder of the paper is organized as follows. In Related work, we refer to the available scientific literature, which provides the basis for discussion. We provide a glimpse into the existing FinTech literature and build on our theoretical background identifying the meaning of financial and digital innovation and the main drivers of financial innovation. Subsequently, we outline the research Methodology of this study under the respective section. Under Results, we provide an overview of the collected data, both quantitative and qualitative, and the observations. Our results include two components: the main actors involved in the development of the phenomenon (namely organizations, persons, and locations) and the subjects that arose in the context of FinTech during the studied period. We then summarize our analysis and research findings under Discussion. Here, we discuss how the perception of FinTech fits into the media discourses observed in the studied sources. The drivers of FinTech are the focus, and we discuss how they motivate the phenomenon and create an ecosystem for FinTech innovations. This leads us to Conclusions and limitations, which also presents the scope for future research.
Although the phenomenon of FinTech is still gaining popularity and interest among IS researchers, there have been attempts to elucidate on the new industry. Zavolokina et al. (2016) propose the conceptual framework of an understanding of FinTech perceived by the popular press. This conceptual framework represents the reflection of public opinion on the transformation occurring in the financial sector and, therefore, by its nature can be an evolving entity. The conceptual framework proposes that FinTech has three dimensions – input, mechanisms, and output and acts as a transformation machine. This machine uses technology as an input combined with organization and investment flow. The transformation includes activities such as “create/change/improve” that are applied to information technology to finance, disrupt, and create competition. As the output of such transformation, new services, products, business models, or processes are created. In our study, we examine the antecedents of such transformation and discuss how they fit and shape the perception of FinTech within the presented conceptual framework. FinTech is closely related and linked to financial innovation. Therefore, we address the literature on financial innovation complementing it with the basic and wellestablished understanding of digital innovation. Frame and White (2014) provide an overview of how financial innovation has changed within three categories – new products and services, new production processes, and new organizational forms. Financial innovation can be considered “the act of creating and popularizing new financial instruments new financial technologies, institutions, and markets” (Lerner and Tufano 2011). Scholars have approached financial innovations from different perspectives, for example, historical (Miller 1986), functional (Merton 1995), legal, and organizational viewpoints. Moreover, according to Cuesta et al. (2015), there is no doubt that FinTech parallels global digitalization and, therefore, we provide a definition of digital innovation, which we refer to in this research. Digital innovation is defined by Fichman et al. (2014) as a “product, process, or business model that is perceived as new, requires some significant changes on the part of adopters, and is embodied in or enabled by IT.” We provide insights into the antecedents of FinTech from the perspective of the popular media. This helps to identify the links between the overall innovation discourse and the FinTech phenomenon. In our study, we address both parts of the research question in identifying the drivers that underlie and motivate the FinTech phenomenon. Therefore, the literature that highlights the main forces that advance financial innovation is the focus. These drivers are not mutually exclusive and naturally overlap each other. Studies agree that tax changes and changes in governmental regulations are not the only influences on the creation of new opportunities and the potential for “successful” innovations (Frame and White 2004; Miller 1986; Tufano 2003). Financial innovations that are influenced by taxes or regulations can be seen as both a socially positive or negative phenomenon (Frame and White 2004). For example, one prominent case which demonstrated how regulation may foster innovation is related to IBM, which controlled over the 70% of the computer market and was considered to be a monopoly. The United States Department of Justice forced the company to separate its hardware and software business, which stimulated competition and innovation in the industry, led to lower prices (“Regulation of IBM 1996). Another driver of financial innovation suggested by the literature is underlying technologies (e.g. telecommunications or data processing) that enable more accurate risk management (Frame and White 2004; Tufano 2003). Additionally, Frame and White (2004) consider that instable macroeconomic conditions might foster financial innovations because the conditions create uncertainty and risk such as global economic crises. Moreover, having summarized the literature on financial innovation, Tufano (2003) derives other factors that stimulate financial innovation. These include market incompleteness or the unfulfilled needs of market players; agency issues, and information asymmetries, referring to conflicts of interests between involved parties; and transaction, search, or marketing costs such as, meaning innovations that aim to reduce costs. These are the main factors influencing and stimulating financial innovations suggested by the literature. The factors are not listed and discussed in order of priority, weight, or the impact they have on innovations. Therefore, we do not assess them from this perspective. We note that all of them refer to dynamic and changing notions and not stable constructs, which corresponds to the approach of our study on FinTech as it has changed over time.
To identify and discuss the antecedents and the drivers of the FinTech phenomenon, we analyze the media discourse on the socially constructed understanding of the phenomenon, the interrelationships between influencing factors and technological change which are treated as unavoidable (Cukier et al. 2009). Discourse analysis of novel concepts faces specific methodological challenges: the starting point for the analysis is often an underspecified buzzword rather than a well-designed concept. Consequently, the method used in this study enables an exploratory and open-ended approach to the data. Because newspapers form the base of our inquiry, the applied method acknowledges the not-neutral and subjective features of the considered texts. There is a notable variety of methods employed in constructive approaches to datasets ranging from content analysis to a family of discourse analysis methods including critical or interpretative discourse analyses and radical humanism (Cukier et al. 2004; Wooffitt 2005). These paradigms differ in their conceptualization of the discourse. Because of the exploratory nature of our research, and based on the need to broadly characterize the phenomenon FinTech, we adhere to the interpretative paradigm. We assume the reality and discourse to be socially constructed and focus on examining the status quo rather than affecting change (Cukier et al. 2004). We enrich the analysis by employing tools typical for content analysis such as the identification of central entities and dominating topics in the texts. This allows for a better illustration of the identified trends and discourses.
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