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Selected Readings of Digital Finance Literature

Jul 25-2024   



 

The fusion of digital technology and finance has been unleashing disruptive effects. Selected Readings of Digital Finance Literature, edited by Xie Xuanli of the NSD and published by Peking University Press, provides a comprehensive navigation of the exciting landscape commonly known as FinTech. Xie Xuanli is PKU Boya Young Scholar, the Ministry of Education’s Changjiang Young Scholar, NSD Associate Research Fellow, and head of research at PKU Institute of Digital Finance.

 

In a guided reading of the book, Xie Xuanli used four articles in a section of the book to answer some of the core questions concerning financial practices and theories: What is FinTech? What values does it create? What challenges does it pose to traditional financial institutions?

 

Though widely in use as a term, FinTech still misses a uniform definition and clear-cut business scope. The first article (Stulz, 2019) and the second one (Chen, Wu and Yang, 2019) expound on FinTech business types and innovations respectively. As for definition of FinTech, Xie Xuanli referred to the one by the Financial Stability Board, which she found ‘highly inclusive’: business models, applications, processes or products innovations that are driven by technology and are likely to exert tremendous impact on financial markets, institutions or services.

 

The third article (Boot et al., 2021) provides a great theoretical framework for understanding the values brought about by FinTech, wrote Xie Xuanli. Digital technology has led to innovations in information treatment and communications. The use of non-financial information through digital technology, such as ‘digital footprints’, uproots traditional financial institutions’ reliance on hard information (like financial statements) and soft information (like inter-personal relationships). As for communications, the mobile internet has lowered the threshold for startups to get in contact with customers and reduced the costs for matching services with clients.

 

Empirically, the second article (Chen, Wu and Yang, 2019) offers quantitative measurement of the values of FinTech. By identifying the impact of FinTech patents on stock prices, the research puts the average value of a FinTech innovation at USD46 million. The fourth article (Suri, Bharadwaj and Jack, 2021) zooms in on the digital and mobile-enabled credit in Kenya and illuminates FinTech’s enormous contribution to inclusive finance in developing countries. The M-PESA services by Safaricom of Kenya have not only bettered people’s lives but also solidly support economic growth.

 

What do all these bode for traditional financial institutions like banks? The third article (Boot et al., 2021) advocates examining the ramifications from the perspectives of both FinTech startups and big tech platforms. Though concerned about the prospects of banks, the authors offer some advice for them, including making tech investments, focusing on corporate clients, and leveraging existing trust from clients and diversified businesses to offer deep advisory and tailor-made services.

 

Selected Readings of Digital Finance Literature

Jul 25-2024   



 

The fusion of digital technology and finance has been unleashing disruptive effects. Selected Readings of Digital Finance Literature, edited by Xie Xuanli of the NSD and published by Peking University Press, provides a comprehensive navigation of the exciting landscape commonly known as FinTech. Xie Xuanli is PKU Boya Young Scholar, the Ministry of Education’s Changjiang Young Scholar, NSD Associate Research Fellow, and head of research at PKU Institute of Digital Finance.

 

In a guided reading of the book, Xie Xuanli used four articles in a section of the book to answer some of the core questions concerning financial practices and theories: What is FinTech? What values does it create? What challenges does it pose to traditional financial institutions?

 

Though widely in use as a term, FinTech still misses a uniform definition and clear-cut business scope. The first article (Stulz, 2019) and the second one (Chen, Wu and Yang, 2019) expound on FinTech business types and innovations respectively. As for definition of FinTech, Xie Xuanli referred to the one by the Financial Stability Board, which she found ‘highly inclusive’: business models, applications, processes or products innovations that are driven by technology and are likely to exert tremendous impact on financial markets, institutions or services.

 

The third article (Boot et al., 2021) provides a great theoretical framework for understanding the values brought about by FinTech, wrote Xie Xuanli. Digital technology has led to innovations in information treatment and communications. The use of non-financial information through digital technology, such as ‘digital footprints’, uproots traditional financial institutions’ reliance on hard information (like financial statements) and soft information (like inter-personal relationships). As for communications, the mobile internet has lowered the threshold for startups to get in contact with customers and reduced the costs for matching services with clients.

 

Empirically, the second article (Chen, Wu and Yang, 2019) offers quantitative measurement of the values of FinTech. By identifying the impact of FinTech patents on stock prices, the research puts the average value of a FinTech innovation at USD46 million. The fourth article (Suri, Bharadwaj and Jack, 2021) zooms in on the digital and mobile-enabled credit in Kenya and illuminates FinTech’s enormous contribution to inclusive finance in developing countries. The M-PESA services by Safaricom of Kenya have not only bettered people’s lives but also solidly support economic growth.

 

What do all these bode for traditional financial institutions like banks? The third article (Boot et al., 2021) advocates examining the ramifications from the perspectives of both FinTech startups and big tech platforms. Though concerned about the prospects of banks, the authors offer some advice for them, including making tech investments, focusing on corporate clients, and leveraging existing trust from clients and diversified businesses to offer deep advisory and tailor-made services.