An exploratory study of the financial and non-financial performance impacts of interactions between ecosystem actors of the FinTech revolution

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Browne, Oliver
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University College Cork
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FinTech is an abbreviation of financial technology, characterised by start-ups and emerging technologies that have the potential to transform traditional financial services by making transactions and processes less expensive, more convenient, and more secure. This thesis conducts three studies on FinTech firms at various corporate life cycle stages. These studies explore the financial and non-financial impacts of interactions between incumbents, new entrants, and regulators as key FinTech ecosystem actors. The first study seeks to understand the barriers to technology adoption for an incumbent multinational systemically important financial institution. This study explores emerging financial technologies as a potential solution to issues of historic myopic investment in information technology. Second, this thesis examines new FinTech ventures and their decision-making process around accelerator programmes, exploring whether high-quality ventures choose to participate in accelerators and their impact on performance and external capital. Third, this thesis seeks to understand the relationship between board diversity and performance for a sample of private FinTech firms. Incumbent FS firms encounter legacy information system (LIS) issues and competing priorities for the provision of internal investment resources. Many incumbents’ labyrinth of legacy systems are prone to lacking documentation, poor data quality and manual processes. At the same time, routine rigidity persists due to fears of system downtime affecting core customers. The first study in this thesis describes the design and development of a novel ontology-based framework to illustrate how ontologies can interface with existing distributed data sources. The framework is then tested using a survey instrument and an integrated research model of user satisfaction and technology acceptance. The results reveal a significant reduction in manual processes, increased data quality, and improved data aggregation from employing the framework. In contrast to incumbents, new ventures often have limited resources and may seek external investment to survive. However, private firms face significant competition for scarce resources and information asymmetries between investors and new entrants. To reduce information asymmetry, new entrants may seek certification from accelerators as a signal of venture quality. The second study in this thesis uses a handcollected dataset of 1,253 private UK firms to explore the impact of accelerator participation on firm performance. This study shows that firms that participate in an accelerator raise greater amounts of capital than a matched sample of non-accelerator FinTech firms. However, these firms, in turn, exhibit poorer financial performance. This finding indicates that accelerators do not attract the highest quality firms, and high-quality firms may choose to avoid participating in accelerators as a countersignal of venture quality. In contrast, evidence suggests that regulatory accelerator participation may signal venture quality. The final study assesses the effect of board characteristics on firm performance in a sample of 189 UK registered FinTech firms as new ventures may signal quality through cultivating a large, more diverse, or prestigious board. The final empirical chapter provides evidence that increased female board representation contributes to improved performance in early-stage private FinTech firms. Furthermore, more than half of firms have no female board representation, and only one-in-ten directors are female. FinTech is characterised by increased start-up activity and innovations that threaten to disrupt incumbent processes. This thesis contributes to assessing the efficacy of FinTech firms’ efforts to signal venture quality, the impact of board characteristics on private firm performance, and incumbents’ response to FinTech. This thesis, therefore, provides significant contributions to the FinTech domain through advancing science and knowledge. It creates value for those operating accelerator programmes, incumbent organisations seeking to integrate new financial technologies with legacy information systems, and for effective governance of FinTech firms towards optimum performance.
FinTech , Big Data , Financial technology , Financial performance , Semantic ontologies
Browne, O. 2022. An exploratory study of the financial and non-financial performance impacts of interactions between ecosystem actors of the FinTech revolution. PhD Thesis, University College Cork.
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