Fintech Framing Financial Ecologies: Conceptual And Policy-related Implications

Fund Fellow Founders Fintech Framing Financial Ecologies: Conceptual And Policy-related Implications

The article discusses Financial Ecologies (FEs), which are place-based governance forms of financial services provision that are currently being transformed by financial technologies (Fintech). Marta Gancarczyk and Óscar Rodil Marzábal did an amazing job putting all together.

Summary:

FEs are socially and economically relevant because they provide financial services to underserved or excluded market segments and intermediate for territorial development across industries and sectors of private and public entities. However, the FE remains at an early stage of conceptualization and empirical confirmation, particularly in terms of how Fintech affects its core elements and related policy implications.

The article wants to figure out how Fintech affects FEs and what it means for concepts and policies. The researchers did a review of 48 publications and found that Fintech has changed everything about FE, which has implications for concepts and policies. They made a set of suggestions based on their findings.

It also explains what financial ecosystems are and how they relate to other ideas of networking for economic development. It also suggests some research questions for future studies.

Introduction

Fintech is ICT-based (I_nformation and Communications Technology_) financial innovation and related businesses.
Fintech affects product/service technical parameters, economic organization, and transcends geographical borders.
Financial sector comprises global financial networks (GFNs) and financial ecologies (FEs).
FEs are financial intermediaries and other agents focused on providing/accessing financial services in specific territories.
FEs composed of private/public entities and relationships between them.
Financial ecosystem concept relevant due to disproportionate outcomes of small ecologies.
Article aims to identify how Fintech frames the financial ecosystem and proposes related implications.
Construct clarity principles and concept reconstruction used to frame the FE concept.
Systematic literature review conducted.
Findings suggest a reframe of financial services governance with tech advancements and territorial focus.
Article presents literature review, results, discussion, and conclusion.

Conceptual foundations

Financial ecosystems were introduced to policy framework in 2006 and are an alternative to neoclassical equilibrium-based doctrine.
Financial ecosystems provide a broad framework to understand the functioning and change in the financial sector, especially in response to environmental and regulatory shocks.
The concept of financial ecosystems originated in economic geography to address issues related to financing for particular territorial populations.
Financial ecologies are systemic phenomena that comprise both actors and their relationships and are delimited by a given location.
FEs share many characteristics with wider financial systems but also have unique characteristics, such as a clear delimitation of a territorial space.
Fintech is an ongoing breakthrough transformation in financial ecosystems and financial enterprises.
FEs focus on socioeconomic effects for disadvantaged market segments and particular industries and projects, and on network governance of a complex and multi-actor adaptive system.

Methodology

Methodology follows construct clarity and reconceptualization principles.
Checking how Fintech affects core elements of financial inclusion in FEs.
Describing relationships and governance among FEs affected by Fintech.
Systematic literature review in Scopus and WoS, with search terms including "financial ecosystem" and "Fintech ecology".
Final sample of 48 items, including peer-reviewed articles, books, book chapters, and conference papers.
Theoretical coding based on construct clarity and crucial elements of FEs, with quotes and paraphrases tabulated according to main coding themes.

Fintech framing actors in financial ecologies

Fintech affects the density and composition of actors in financial ecosystems, including banks, nonbank financial institutions, Bigtech, Fintech startups, state entities, industry partners, financial regulators, investment community, B2B, social entrepreneurs, non-profit organizations, and customers.
Banks underwent outsourcing to Fintech and were challenged by new players, but are expected to maintain their dominant position.

Fintech framing governance in financial ecologies

Bigtech and Fintech shift financial sector governance from public to private, undermining political accountability.
Fintech governance dominated by donor states, private investors, and transnational civil society actors from the Global North.
Governance in financial ecosystems focuses on market segments and particular projects.
Private digital platforms less efficient than those led by state agencies, banks, and private equity.
Studies recommend more government involvement in financial ecosystems, while acknowledging their complex adaptive nature.

Fintech framing the outcomes of FEs

Selected research sample shows range of outcomes and roles of Fintech in FEs, not unequivocal impact
Lyons et al. (2022) found positive effects of Fintech on financial inclusion, income, industrial integration, financial support, and resilience within family and social networks
Negative effects reported from digital debt financing, including stratification of customers based on impersonal metrics, gender or wealth division, and over-indebtedness
Mixed socio-economic effect of Fintech in financial inclusion ecosystems, influenced by spatial contexts and government intervention
Wealthy segments of financially literate individuals in Anglo-American economies also benefit from new financial products.

Fintech framing the concepts related to FEs

The financial ecology phenomenon is explained using concepts like entrepreneurial ecosystems, Fintech ecosystems, networks, open innovation systems, digital platforms, and complex adaptive systems.
Financial entrepreneurial ecosystems adopt related taxonomies and focus on actors entering the system due to technological advancements.
Fintech ecosystems are often synonymous with clusters, but they do not cover the entire financial ecosystem.
The FE can be explained through complexity theory and the adaptation of multiple actors to external environments.

Conclusion

This research contributes to the understanding of financial ecosystems and their relationships with other spatial networking ideas, as well as their enhancement by Fintech.
Proposals for further investigation and research areas were suggested, along with evidence-based hypotheses.
Limitations of the research sample were acknowledged, including the need for more theoretical background and clarity on governance mechanisms.
Other research topics were briefly mentioned, including cryptocurrencies, strategic alliances between banks and Fintech start-ups, crowd investment motivations, financial obstacles and innovative behavior of firms, and peer-to-peer lending ecologies.

Full Report: HERE (ResearchGate)

Might be useful:

Reference: