## Does FinTech Increase Bank Risk Taking?

_IMF Working Papers, January 26, 2024_

## Source details

**Canonical URL:** [Does FinTech Increase Bank Risk Taking?](https://www.imf.org/en/publications/wp/issues/2024/01/26/does-fintech-increase-bank-risk-taking-544028)

## Other formats

- [Markdown version](/en/publications/wp/issues/2024/01/26/does-fintech-increase-bank-risk-taking-544028/index.md)
- [Structured JSON version](/en/publications/wp/issues/2024/01/26/does-fintech-increase-bank-risk-taking-544028/index.json)
- [Bundle manifest](/en/publications/wp/issues/2024/01/26/does-fintech-increase-bank-risk-taking-544028/bundle-manifest.json)

## Bibliographic details
- Authors: Selim A Elekdag, Drilona Emrullahu, Sami Ben Naceur
- Published: January 26, 2024
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798400265167.001

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### Main findings
- Using a curated database covering over 10,000 FIs and global FinTech activities, the paper finds a robust relationship whereby greater FinTech presence is associated with heightened risk taking by financial intermediaries (FIs), offering support for the competition-fragility hypothesis.
- Inclusion of bank-, industry-, and country-specific characteristics can alter this relationship.
- Suggestive evidence indicates that in certain cases, greater FinTech presence may be associated with less FI risk taking amid stronger domestic institutions.
- The paper presents a novel framework that may help reconcile conflicting results in the literature supporting both the competition-fragility and competition-stability hypotheses.

### Research question and theoretical context
- Revisits the debate on the impact of competition on financial stability:
  - Competition-fragility hypothesis: greater competition encourages greater risk taking.
  - Competition-stability hypothesis: more competition can increase financial stability.
- Focus: how FinTech activities influence risk taking by financial intermediaries.

### Data and scope
- Curated database covering over 10,000 FIs and global FinTech activities.
- Global scope, examining interactions between FinTech presence and FI risk taking across bank-, industry-, and country-level factors.

### Policy relevance and implications
- Evidence supports policy discussion on how FinTech expansion affects financial stability through its competitive effects on traditional financial intermediaries.
- The finding that stronger domestic institutions can mitigate increased FI risk taking suggests targeted institutional-strengthening measures could shape the stability implications of FinTech growth.
- The novel framework offered in the paper can inform policymakers and researchers aiming to reconcile divergent empirical results on competition and stability.

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## Content in this bundle

- **Working Paper**
  - [Working Paper (Markdown version)](/-/media/files/publications/wp/2024/english/wpiea2024017-print-pdf.pdf.md){rel="alternate" type="text/markdown"}
  - [Working Paper (PDF)](/-/media/files/publications/wp/2024/english/wpiea2024017-print-pdf.pdf){rel="external" type="application/pdf"}

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_Source: https://www.imf.org/en/publications/wp/issues/2024/01/26/does-fintech-increase-bank-risk-taking-544028_