Biblio Kelompok 6

Available online at http://jess.esrae.
ru/
“Journal of Economics and

Social Sciences”
Emerging FinTech market: types and features of new financial

technologies
Tomsk Polytechnic University
Anna Ryabova a
a
Institute of Humanities, Social Sciences and Technologies, Tomsk Polytechnic University
Abstract
FinTech is a new and very ambitious tendency. P2P-crediting, E-wallets, Bitcoins, mPOS-acquiring, T-commerce,
mobile banks – all of them refer to financial technologies that are changing our life. People can obtain any credits
through special services on the Internet from other users without participation of banks, pay by credit card with mobile
devices, and get information about expenses and incomes according to the card anywhere in the world. Users do not
need to go to banks anymore and to spend their time for credit arrangements, currency exchange; to look for ATMs to
remove cash. Purchases on the Internet can be paid not only in rubles, but also in new digital currency. FinTech
projects are preferred not only by users but also by young entrepreneurs and investors.
Keywords: financial technologies, FinTech, investment, start-up, innovations;
1. Introduction
The FinTech is a new concept for Russian market as well as for the whole world. That is why
there is no clear and consisted definition of FinTech but there are many ideas about this issue.
According to the Internet references FinTech is financial technologies which provide various
financial services. It is connected to information technologies and focuses on growing of
operation efficiency in a financial sector.
2. Development of FinTech
Before examining the main types of FinTech the establishment of FinTech which was started
by Silicon Valley should be explained. There have been created many IT projects which later
answered for a sort of “accelerator” to modern financial technologies. Nowadays it is London that
is known as the capital of FinTech because of the number of fintech innovations and its
investment flow. There are four main factors determined to encourage the development of
FinTech in Great Britain: intensive infrastructure, literate legal framework, verifiable tax system
and investment support in the country.
As has been noted above, FinTech was engendered in the USA and Europe earlier than in
Russia. It came to domestic market only in 2008 when cellular operators took part in the
development of mobile payments. Today Russian market of FinTech is still in arrears of foreign
markets but it has an active growth.
Nowadays, there are many new words that we hear every day; most of them become more and
more popular. Equiering, P2P, bitcoins, online banking, e-wallets and other specific terms have
become so clear and ordinary that we start using them in our everyday life. For the first time they
may seem to be unknown but if we get some more information about them we will understand
them at once.
2.1 Types and features
To start with P2P-lending it should be announced that “P2P” abbreviation stands as “peer-to-
peer” or “person-to-person”. This term means that there are only two participants (in most cases
they are real men) in the process of loan granting without any intermediary agents such as banks
and credit institutions. There are special web sites where a user can be a borrower as well as a
lender. The biggest part of provided credits within such services belongs to not assured private
loans. However, sometimes the involvement of companies (legal bodies) is also possible.
In case of P2P lending risk is higher because it is impossible to check the real credit history of
a borrower in most cases and to make his loan scoring. Correspondingly, interest rates for these
credits will be relatively overstated. Thus, creditors prefer to lend many small loans to many
loaners to decrease their non-repayment risks.
Another very popular financial technology is E-wallet or electronic wallet which allows paying
for any goods and services through the Internet. For developing this concept there is an official
law which runs up the maximum size of possible sum of money in your E-wallet – from 100,000
rubles to 400,000 rubles. Now it is multiplied by four. The Russian market of E-wallets has 6
players who get more active positions – five of them are domestic service (Webmonety Transfer,
Yandex.Money, QIWI, RBK Money, [email protected]), the last one is a foreign one (International
money-transfer system PayPal).
Apart from E-wallets allowing controlling the purse strings online, there was created
completely numerical P2P currency – Bitcoin. It is intended to be a substitute for cash when you
do shopping in the Internet. Unlike other types of e-money which is kept on bank deposits and
transferred with the aid of different payment systems, bitcoins are used outright between clients
without any intermediary agents. That is why bitcoins have become a real direct rival for native
currencies.
Today paying by credit cards for shopping is an everyday occurrence. Nevertheless, shops
have to set up special POS-terminals to make transactions with credit cards. At small shops,
stands, kiosks it is difficult to provide such terminals, that is why there is a necessity of cash all
the time to buy any products. To solve this problem there is a new technology – Mobile Point of
Sale, or for shot mPOS terminal.
The terminal is represented like a computer device which you have to connect with your
mobile phone or tablet computer and it allows doing cashless transfers by your credit card. It is
especially valuable for small and portable businesses, sole traders. For example, delivery agents
of any products or documents can use this technology device to get refund for delivery on site. It
is very convenient for a company as well as for clients because they do not need to withdraw
money before making the order. By dint of mPOS terminals of any firms are able to increase their
profitability, for that reason its demand is very high on the market. By the way, investment
analysts also mark the active growth of these devices. For example, according to Smart Insights
research the number of mPOS terminals will exceed the number of POS terminals and will have
achieved 52 m pieces by 2018 [2].
The leader of this field in Russia is LifePay. The project has got more than 6 thousand users
for a half year. During 2013 the total sum of money of all transactions which were made by the
mPOS readers was more than $1m. The most successful mPOS companies on the world market
are Square, SumUp, iZettle, mPowa.
Regarding smart phones and tablet computers usage for doing any financial transactions, it
stands to mention another concept – T-commerce – which is directly concerned with modern
gadgets. It stands for tablet-commerce. This term was coined by specialists from Silicon Valley
due to the fact of beginning of “mobile” era in economy. Steady growth on mobiles and tablets
market is registered all over the world, so it is a fertile ground for t-commerce evolution.
Furthermore, mobile banking is also developing. According to The Economist and NY Times,
the next generation of banks, which has only mobile version (e.g. Simple, Moven), wins from
traditional banks because of the new customer generation. There is a similar trend in Russia.
Mobile banking has some advantages: the work place is where the customer is; client can look
over his balance of account; he has an access to his personal manager, revenues and expenses
analytics.
2.2The Periodic Table of FinTech
Due to fast FinTech market growth there is a need of its classification. One American research
company, CB Insights, which deals with venture capitalists and investors data bases and presents
daily the information has created the Periodic Table of FinTech.
Fig. 1 The Periodic Table of FinTech
The Periodic Table (fig.1) is a resource that helps to illuminate the key players in Fin Tech
ecosystem. The 177 companies, investors and acquirers on the table are pulled from analysis
using CB Insights data around financial health, company momentum, investor quality and
M&A/IPO activity [1].
The Table will not be the same in a few times because new players constantly come to this
market. Many of them become new leaders so fast that they force strong competitors out of the
market. In general the Table focuses on seven different types of organizations. they are the
following:
1. Lending. Private landing companies, P2P-lending, lending platforms using machines
learning technologies and algorithms to assess creditworthiness.
2. Payments or Billing Tech. Payments processing, bill preparing.
3. Personal Finance or Asset Management that help in managing personals bills, accounts,
credits, investments.
4. Money Transfer or Remittance. P2P-platforms to transfer money between clients across
countries.
5. Digital currency. Software in the digital currency sphere.
6. Institutional tools providing tools to banks, hedge funds, mutual funds or other institutional
investors.
7. Equity crowdfunding - platforms for providing monetary contribution for projects or
companies.
There are also some other groups of companies: venture capital firms, corporate investors,
angel investors, accelerators (incubators), FinTech acquirers and notable exists (companies that
have been acquired or gone to the public in last 5 years).
3. Conclusion
To sum up, it should be stressed that FinTech market is very active and attractive for start-ups
as well as for investors. Every day there are new leaders and newcomers that shake up the market
and make competitors to create innovative and effective products. Even if FinTech fails to take
over the world: its emergence is changing the face of finance.
Acknowledgements
This research was financially supported by National Research Tomsk Polytechnic University.
References
1. CB Insights (2014). The Periodic Table of Fin Tech Press [Available at:
https://www.cbinsights.com/blog/fin-tech-periodic-table/ [Accessed 09/12/2015].
2. Smart Insights (2014). Mpos market dynamics will reduce traditional pos sales by 10
million units according to smart insights report [Available at:
http://www.smartinsights.net/Company/Our-news/mPOS-market-dynamics-will-reduce-
traditional-POS-sales-by-10-million-units-according-to-Smart-Insights-Report [Accessed
05/12/2015].
3. Verbovskii, V.A., Poletaev, D.A., Chayka, Y.A. (2014). Basics of successful startup
development in the field of innovation. Journal of Economics and Social Sciences, Vol. 5
[available at: http://jess.esrae.ru/8-101] [viewed on 09/12/2015].
SHS Web of Conferences 28, 01051 (2016) DOI: 10.1051/shsconf/20162801051
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FinTech Market Development Perspectives

Ekaterina Kalmykova 1,a, Anna Ryabova1
1
Tomsk Polytechnic University, 634050 Lenin Avenue, 30, Tomsk, Russia
Abstract. Fast development of technologies has led to emergence of the new market – FinTech – which is
very attractive for investors today. By now this market has a great number of different concepts: P2P-
crediting, E-wallets, Bitcoins, mPOS-acquiring, T-commerce, mobile banks, etc. Many of these tools have
already heavily entered our ordinary life. People can obtain any credits through special services on the
Internet from other users without participation of banks, pay by credit card using mobile devices, and get
information about expenses and incomes according to the card anywhere in the world. Users do not need to
go to banks anymore and to spend their time for credit arrangements, currency exchange, to look for ATMs
to remove cash. Purchases on the Internet can be paid not only in rubles, but also in new digital currency.
These tools make life easier, however, they pose a serious threat for banks. Now, bank institutions should
create more convenient and utility services for the clients to keep clients. Therefore, bank and credit systems
start to change actively.
Introduction also a threat for traditional financial institutes such as

banks and credit agencies.
Nowadays, FinTech market, or the market of financial
technologies, is one of the most active growing markets
in the world. FinTech types
Financial technology is a sector of economic where
companies offer different financial services by using Before examining the main types of fintech, the
new technologies to make this process more efficient for establishment of FinTech, which was started by Silicon
themselves and more convenient for customers. Valley, should be explained. It is a place where most of
FinTech market has already many tendencies. The IT projects have been designed and which later were
most popular among them are P2P lending, E-wallets, treated as a sort of “accelerator” to modern financial
Bitcoins, mPOS acquiring, T-commerce, M-wallets technologies. Today it is London that is known as the
(mobile banking), etc. At first sight it seems that there is capital of FinTech because of the number of fintech
no familiar concept which you have ever met. However, innovations and its investment flow. Great Britain has
after a proper review, it will be obvious that many four main factors determined to encourage the
people have faced some of these financial technologies development of FinTech: intensive infrastructure, a
in one way or other. literate legal framework, a verifiable tax system and
Financial, monetary and credit systems are changing investment support in the country.
so quickly because of the fast technology development. As has been noted above, FinTech was engendered in
There are many coming conversions from some elements the USA and Europe earlier than in Russia. It came to
to more modern ones, e.g. from cash to E-wallets or domestic market only in 2008 when cellular operators
from bank credits to borrowing money through the took part in the development of mobile payments. Today
Internet by other users. That is why banks have to create the Russian market of FinTech is still in arrears of
time after time new lending instruments to keep their foreign markets, but it grows actively.
clients. We will start with P2P lending, very widespread
Therefore, FinTech market is not only new technology now. This abbreviation is interpreted as
possibilities and perspectives for start-up companies, but “peer-to-peer” or “person-to-person” lending, i.e.
lending from one person to another. This term means
a there are only two participants (in most cases they are
Corresponding author: [email protected]
© The Authors, published by EDP Sciences. This is an open access article distributed under the terms of the Creative Commons Attribution
License 4.0 (http://creativecommons.org/licenses/by/4.0/).
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natural persons) in the process of loan granting without

because the only thing that users need for their
any intermediary agents such as banks and credit
identification is e-mail.
institutions. There are special web sites where a user can
International money-transfer system PayPal is a
be a borrower as well as a lender. The biggest part of
serious foreign competitor for Russian companies. It is
providing credits within such services belongs to not
one of the most popular services of the world; it was
assured private loans. However, sometimes the
based in 1998 and nowadays it is used by more than 100
involvement of companies (legal bodies) is also possible.
million users. Within this system users register simply
In case of P2P lending, risk is higher because it is
their private account; major customers can set up a
impossible to check the real credit history of a borrower
business account. In Russia PayPal is available only
in most cases and to make his/her loan scoring.
when paying for shopping. Electronic currency cannot be
Correspondingly, interest rates for these credits will be
taken out or be admitted from other users.
relatively overstated. Thus creditors prefer to lend many
Apart from E-wallets allowing controlling the purse
small loans to many loaners to decrease their non
strings online, completely numerical P2P currency –
repayment risks.
Bitcoin – was created. It is intended to be a substitute for
Zopa (Zone of Possible Agreement) which was
cash when you do shopping on the Internet. Unlike most
founded in 2005 in the UK became the first P2P lending
of the types of e-money, which are kept on bank deposits
service in the Internet. In a year, USA had also some
and transferred with the aid of different payment
P2P companies, e.g. Prosper and Lending Club. In
systems, bitcoins are used outright between clients
Russia, these technologies appeared only in 2010 but
without any intermediary agents. That is why bitcoins
they started functioning only two years later. At present
have become a real direct rival for native currencies.
there is credit exchange house which is based on the
Today paying by credit cards for shopping is an
Webmoney service and another one is Vdolg.ru, a
everyday occurrence. Nevertheless, shops have to set up
project of Banki.ru.
special POS-terminals to make transactions with credit
Another very popular financial technology is E-
cards. At small shops, stands, kiosks there is a difficulty
wallet or electronic wallet which allows paying for any
in providing such terminals; that is why there is a
goods and services through the Internet. Specifically for
necessity in cash all the time to buy any products. To
developing this concept, there is an official law which
solve this problem there is a new technology – Mobile
runs up the maximum size of possible sum of money in
Point of Sale – or mPOS terminal for short.
your E-wallet – from 100,000 rubles to 400,000 rubles.
The terminal is represented as a computer device,
So, now it is multiplied by four. Russian market of E-
which users have to connect to their mobile phone or
wallets have 6 players who get the more active positions
tablet computer, and it allows doing cashless transfers by
– five of them are domestic service (Webmonety
user’s credit card. It is especially valuable for small and
Transfer, Yandex.Money, QIWI, RBK Money,
portable business, sole traders. For example, delivery
[email protected]), the last one is foreign (International
agents of any products or documents can use this
money-transfer system PayPal).
technology device to get refund for delivery on site. It is
One of the most popular electronic systems in CIS
very convenient for a company as well as for clients
(Commonwealth of Independent States) is Webmoney
because they do not need to withdraw money before
Transfer oriented to money exchanging and conducting
making the order. By dint of mPOS terminals many
transactions of online currency. It offers a lot of
firms are able to increase their profitability, for that
functions, opportunities and operations on finance
reason their demand is very high on the market. By the
instantly produced.
way, investment analysts also mark the active growth of
The second famous payment system in CIS is
these devices. For example, according to Smart Insights
Yandex.Money which provides safety exchange and
research the number of mPOS terminals will exceed the
transfer of online currency to other users keeping all
number of POS terminals and will have achieved 52
necessary data about your operations.
million pieces by 2018 [1].
The next Russian service on this market is QIWI
The leader of this field in Russia is LifePay. The
functioning today in more than 20 countries all over the
project has gained more than 6 thousand users for a half
world. It specializes on instantaneous payments of any
year. During 2013, the total sum of money of all
services including various utility bills, banking credits,
transactions, which were made by the mPOS readers,
etc. However, in contradistinction to other payment
was more than $1m. The most successful mPOS
systems, this one has a feature - special self-service
companies on the world market are Square, SumUp,
payment terminals. So you can pay for your bills not
iZettle, mPowa.
only through the Internet or by your mobile phone.
Regarding the use of smart phones and tablet
RBK Money or RUpay is a single payment platform
computers for conducting any financial transactions, it is
working in real time mode. With this service a person
necessary to mention another concept – T-commerce –
can make any operation on his/her online money fast and
which is directly concerned with modern gadgets. It
safely. The main purpose of this technology is paying for
stands for tablet-commerce. This term was coined by
bills and purchases through the Internet, cashing out.
specialists from Silicon Valley due to the fact of the
The last domestic company among the above-
beginning of the “mobile” era in economy. Steady
mentioned players is [email protected] which confines
growth on mobiles and tablets market is registered all
itself to its interface. Payments are possible for making
over the world, so it is fertile ground for t-commerce
with the use of any personnel computer or device
evolution.
2
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Furthermore, mobile banking is also developing.

between traditional banks and innovative start-ups [2].
According to The Economist and NY Times the next
The strengths and weaknesses of both banks and fintechs
generation of banks, which have only a mobile version
mean that both will often do better by cooperating rather
(e.g. Simple, Moven), wins from traditional banks
than by competing.
because of the new customer generation. There is a
Besides the development of "credit" technologies,
similar trend in Russia. Mobile banking has some
there is other interesting segment for the Russian market
advantages: the work place is where the customer is; a
– personal data. For example, Sberbank knows the size
clients can monitor their balance of account; they have
of clients’ salary, how much money they withdraw,
an access to their personal manager, revenues and
where and on what they spend it. And the only one who
expenses analytics.
gets more data than bank is a mobile service provider -
how much time is spent on talks and with whom, how
New perspectives, new competitors much time the subscriber is located abroad, what
additional services are used. All these personal data is a
Fast growth of technologies and FinTech extension part of additional financial services promotion, and also
surely attract attention of investors. It is also justified by a part of how these services will develop analytics.
numbers – in comparison with 2013, in 2014 global Today it is a topic of the hour in the West. All large
venture investments on this market have grown to $12 mobile service providers (e.g. AT&T, Vodafone, T-
billion that is 3 times more than the indicators of the Mobile) are already engaged in handling of such data. In
previous year. Just for the record, Europe is the most Russia this direction is only arising. The combination of
fast-growing FinTech region in the world. In 2014 the FinTech market and the collection of personal data offers
growth of the investments share into financial great perspectives for further economic development in
technologies amounted to 215% [2]. general.
One of the reasons of such rise is credit deficit. The
population often needs more and more small loans which
are not attractive for banks because of their low Legal difficulties
profitability and which have higher risks. It causes good
In spite of the fact that fintech market is spreading
prospects for the companies in the sphere of P2P-
quickly today and there are many new start-ups every
crediting.
month, there is still no legal regulation by the
Cross-border personal loans become the interesting
government. Financial technologies develop so fast that
P2P-crediting sphere, e.g. Russians can obtain the credits
it is difficult to manage all its innovative features in case
through these services from inhabitants of Europe. The
of legal control. However, it is a problem not only for
average interest rate in Russia fluctuates around 25%.
government but for start-upers and customers as well.
Deposit rates in Europe are about 0,5% a year [3], i.e.
Thus, fintech regulation is becoming a global issue.
profitability is very low. Therefore, Europeans can
Today many countries have special institutes to
extend credits to Russians on a higher rate than the
control firms on the financial market. For example, in
deposit rates in Europe, but, at the same time, lower, than
the UK there is Financial Conduct Authority (FCA), an
interest rates in Russia [4]. Thus, such loans are more
independent non-government body. FCA has the power
favourable for both sides.
to regulate firms in the financial sector and its
It should be noted that the active growth of
responsibilities are applying standards and requirements
technologies in the financial segment is going to be
for financial products, regulating marketing and financial
threatening for banks and credit institutes. Therefore,
products’ conduct, investigating firms and applying bans
almost every tenth Russian bank was closed in 2015
where they seem to be appropriate. It regulates such
because of process inefficiency and lack of innovations
players of the market as banks, credit companies, mutual
[5]. Banks have to create better and more convenient
societies and financial advisors. Thereby it is free to
products and services for their clients to survive. If
control some of fintech start-ups.
traditional suppliers on financial market do not switch to
The UK regulates certain activities conducted in
new technologies, their target audience will pass to more
relation to a range of payment, investment and lending
utility and cheap services. At the moment there are only
propositions, which means, as a general rule, a FinTech
about ten banks in Russia among others who have
business needs to consider at an early stage whether it
mobile applications for customer service.
requires regulatory approval to conduct business in the
While banks have disadvantages relatively start-ups,
UK. A surprising range of business models need
they also have advantages. Being regulated is a burden in
regulatory approval to operate in the UK – even when
many ways, it creates consumer confidence. A long
they are not based in the UK.
history brings legacy systems with it and also builds
The FCA's application process, if managed well,
trusted brands (albeit tested by the global financial crisis)
need not be overly complicated or intrusive. The typical
and provides rich historic data, not to mention a banking
authorization timeframe with appropriate resources in
license and a sizable head start in compliance initiatives.
place can comprise a six-week pre-submission
And, of course, banks understand banking; especially the
preparation period, followed by a statutory post-
risks involved, which new entrants often do not [5].
submission period (of up to six months) for FCA to
Looking forward, there will be a new business model
consider the application [6].
of profit-making as a result of possible cooperation
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Regarding the USA, there are other instruments of

decided to explore the possibilities and boundaries of the
regulation. The U.S. Securities and Exchange
Bitcoin technology.
Commission (SEC), for instance, is an agency of the
Some time ago, the Central Bank announced that it
U.S. federal government, which is the main control
wanted to be a part of Fintech evaluation in Russia. It
authority within securities market in the United States. It
has already set up a taskforce for the sole purpose of
holds primary responsibility for enforcing the federal
exploring what can be done in the short and long run.
securities laws, proposing securities rules, regulating the
The taskforce will hold regular meetings to discuss the
securities industry and so on.
technologies they discovered and in what way they can
One of acts enforced by SEC is the Securities Act of
be useful to the Bank of Russia [10]. Today it is also
1933, a federal act according to which investors can be
creating a self-regulating board that allows industry
informed about investments and which allows
players to collaborate on fintech efforts with others [11].
establishing laws against misrepresentation and
fraudulent activities in the securities markets. For
companies working with investments, the Act should be Conclusion
very important, because in case of its breach a company
would face not only civil, but also criminal charges. In It is possible to sum up that the modern FinTech tools
that way, lending companies, such as “Prosper” or have a considerable impact on the economies of different
“Lending Club”, had to register securities with SEC, countries, in particular, on banks and credit systems. On
because in 2008 SEC decided their activities to be in the one hand, they pose a threat for banks and credit
violation of the Securities Act of 1993 – the peer-to-peer institutes as they actively drive them out from the market
loans the companies provided to earn a profit in the due to their modernity and utility. However, on the other
form of interest were at a rate higher than that available hand, it is possible to tell that financial technologies
from depository accounts at financial institutions [7]. increase the quality of the services provided by banks
Last year SEC announced a new set of rules and give an impetus to their productive development
implementing Title IV of the JOBS Act or the Jumpstart towards informatization.
Our Business Startups Act, which intend to encourage There is no doubt that the fintech regulation is not
funding of the U.S. small businesses by easing various still ready for total control of new startups and their
securities regulations. These new rulings will be done technologies. Despite this fact, there are a great number
initially through what are called Regulation A+ of upcoming trends now which will probably lead to a
investment offerings. According to this fact, now, more new economic business model in the end.
people can take part in early-stage investment, and
companies are able to increase their capital with less
regulatory burdens. For FinTech market, these rules are
Acknowledgment
really important and very helpful when developing new This research was financially supported by National
platforms. Thus, fintech startups will be responsible for Research Tomsk Polytechnic University.
complying with the regulations but with no case law yet
to guide them while investors will still be limited in how
much they can invest and with whom [8]. References
Apart from SEC, there is also Financial Industry
Regulatory Authority, Inc. (FINRA) which regulates the 1. Smart Insights, Mpos market dynamics will reduce
members of brokerage firms and exchange markets. traditional pos sales by 10 million units according to
Contrary to SEC, FINRA is a non-governmental smart insights report, (2014). Available from:
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National Association of Securities Dealers (NASD) and news/mPOS-market-dynamics-will-reduce-
regulation of the members’ enforcement and arbitration traditional-POS-sales-by-10-million-units-
operations of the New York Stock Exchange. according-to-Smart-Insights-Report
When considering loaning money to individuals 2. Assotiation of Russian Banks (ARB), FinTech
whether as a creditor or within the investment process, kompanii – konkurenty ili partner, (2015). Available
lending laws appear. Usually these laws are set at the from: http://arb.ru/b2b/trends/fintech_kompanii_
state level, and they restrict such actions as who you can konkurenty_ili_partnery-9902037
lend to, how much you can lend and the interest rates 3. European Central Bank, Key ECB interest rates
charged to borrowers. Each fintech startup in the USA Available from: https://www.ecb.europa.eu/stats
should take care to comply with lending laws that go /monetary /rates/html/index.en.html
hand in hand with securities regulations [9]. 4. A. Turkot, «Startapy segodnya — sbitye letchiki,
Unfortunately, Russia has still no legal regulation of upavshie s nebes na zhestkuyu zemlyu», (2015).
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market. Nevertheless, the Central Bank is an active 2015/191993/turkot-fintech
participant of fintech development in Russia. At the 5. S.I.Ventures, O. Wyman, Anthemis Group, The
same time, the most attractive and challenging fintech Fintech 2.0 Paper: rebooting financial services,
project for the Central Bank is Bitcoin, of course. Firstly, (2015). Available from:
the Bank wanted to abolish the digital currency and http://santanderinnoventures.com/wp-
make using Bitcoin punishable by law. Then the Bank content/uploads/2015/06/The-Fintech-2-0-Paper.pdf
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6. C. Woolard, UK FinTech: Regulating for

innovation, (2016). Available from:
https://www.fca.org.uk/news/uk-fintech-regulating-
for-innovation
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start-ups (The Washington Post, 2015). Available
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innovations/wp/2015/08/27/five-legal-threats-for-
fintechs-hottest-start-ups/
8. Priori Legal, Securities Regulation for FinTech
Startups. Available from:
https://www.priorilegal.com/securities/securities-
regulation-for-fintech-startup
9. N. Athwal, Fintech Startups Navigate Legal Gray
Areas To Build Billion-Dollar Companies, (2015).
Available from: http://techcrunch.com/2015/04/19
/fintech-startups-navigate-legal-gray-areas-to-build-
billion-dollar-companies/
10. OneStopBrokers, Bank of RussiaSets up Teskforce
to Explore Bitcoin and FinTech, (2016). Available
from: http://www.onestopbrokers.com/2016/02/29/
bank-russia-sets-taskforce-explore-bitcoin-fintech/
11. R. Kennedy, Bank of Russia Pushes for Fintech
(Payment Week, 2016). Available from:
http://paymentweek.com/ 2016-3-3-bank-of-russia-
pushes-for-fintech-9812/
European Research Studies
Journal Volume XX, Issue 3A, 2017
pp. 961-973
Fintech as Financial Innovation – The Possibilities and

Problems of Implementation
Svetlana Saksonova1, Irina Kuzmina-Merlino2
Abstract:
There is a growing competition between banks and fintech not only in advanced economies,
but also in the emerging markets. However, it is yet to be observed in Latvia to the same
extent. This paper aims to evaluate fintech’s level of development in Latvia compared to
Europe.
The paper identifies financial services using innovative technologies offered by fintech
companies, analyses the advantages and disadvantages of these services in comparison with
services offered by the traditional financial sector companies (banks, insurance companies,
institutions involved in asset management and investment, etc.), and evaluates how prepared
are consumers to use fintech services. This paper documents the results of the survey aiming
to clarify how well-informed consumers in Latvia are about fintech services, their
convenience, speed and safety, as well as the consumers' current satisfaction with banking
services.
The hypothesis of this paper is that Latvian society is not ready to use services provided by
fintech, but prefers banking services instead. Survey results provide some evidence in favour
of this hypothesis: they show that respondents are generally unaware about fintech services
in Latvia and their associated innovations and new financial products.
This paper makes several recommendations for managers of fintech enterprises, association
of start-up enterprises and risk capital funds as well as state institutions.
Keywords: fintech, competition, innovation in financial services.
JEL code: O16, G21, G23.
1
University of Latvia
2
Transport and Telecomunication Institute
Fintech as Financial Innovation – The Possibilities and Problems of Implementation
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1. Introduction
Fintech or financial technology is a term used to denote firms that offer modern
technology in the financial sector. Such companies have become a noticeable trend
since 2010. Fintech firms are mostly micro, small or medium-sized firms that do not
have a lot of equity, but have a clear idea of how to introduce new or how to
improve existing services in the financial services market. Commonly, these are
fintech start-ups, the number of which is constantly increasing (by various estimates,
their number has already exceeded ten thousand firms). As a rule, venture
investment and crowdfunding are used to finance fintech firms. Some professionals
also claim that fintech start-up enterprises improve the efficiency of the financial
system (Vlasov, 2017; Vovchenko et al., 2017; Setyawati et al., 2017).
There are two main reasons for the emergence of fintech companies. First, the global
financial crisis of 2008, has vividly demonstrated to consumers the shortcomings of
the traditional banking system that led to the crisis. Second, the emergence of new
technologies that helped provide mobility, ease of use (visualization of information),
speed and lower cost of financial services (Anikina et al., 2016).
The potential market for the users of fintech services is very broad - essentially all of
the adult population of the globe. According to the McKinsey Social Sector page
(Chaia et al., 2010), a study conducted back in 2010, nearly 2.2 billion financially
unserved adults live in Africa, Asia, Latin America, and the Middle East, consisting of
eight percent of population of high-income OECD countries (60 million adults), 65
percent of population in Latin America (250 million adults), 49 percent of population in
Central Asia and Eastern Europe (193 million adults), 67 percent of population in Middle
East (136 million adults), 80 percent of population in Sub-Saharan Africa (326 million
adults), 59 percent of population in East and Southeast Asia (876 million adults) and 58
percent of population in South Asia (612 million adults).
These people are potential users of fintech services. The increase in the number of people
around the world, who for various reasons cannot use or are not willing to use traditional
banking services, contributes to the development of FinTech which offers the same
services, but is faster, cheaper and more profitable than banks. For banks, these trends
mean an increase in operational risks and long-term risks (Novokreshchenova et al.,
2016; Fetai, 2105; Thalassinos et al., 2015).
On the other hand, Sharf (2016) indicates that a survey of 10,131 people across
Australia, Canada, Hong Kong, Singapore, the UK and the US about their use of
fintech products revealed that only 15.5 percent of all respondents were using non-
banking services and it was expected that this number would rapidly increase in the
future. 25 percent of respondents indicated that they use non-banking services very
often and in normal practice they use 2-3 non-banking products. These data indicate
that users of banking services are potential customers of fintech services as well.
S. Saksonova, I. Kuzmina-Merlino
963
According to a report by Accenture (a global management consulting, technology

services and outsourcing company), fintech is one of the fastest growing sectors of
the economy. Investments in the industry have increased rapidly reaching 12,2
billion dollars in 2014, while in 2008, it was only 930 million dollars. The highest
increase was observed in Europe (Accenture, 2015). Table 1 summarizes statistics on
investment in fintech in the USA, Europe and Asia for 2014-2016.
Тable 1. Investment in FinTech, 2014-2016 bln.US$ (KPMG, 2016).

Region 2014 2015 2016
USA 14.1 27.4 13.5
Europe 12.0 10.9 2.2
Asia 3.3 8.4 8.6
As can be seen from Table 1, the total volume of investment in fintech in these
regions was $46.7 billion in 2015. In 2016 it fell to $24.3 billion, but this does not
mean a decrease in interest towards this field of activity in general.
However, despite the increase in the total volume of investment in fintech, these
firms cannot yet seriously compete with the banking and insurance sectors of
financial services - according to a survey of young entrepreneurs, users of banking
services in Latvia (2016-2017), most clients are not ready to replace them with the
fintech alternatives (Kims, 2017).
2. Research Methodology
The research was carried out by summarizing scientists' and experts' estimation
about this new and relatively little researched topic both from theoretical and
historical aspects. To reach the aim of the research and verify the hypothesis, data
was processed and gathered with the help of consumer survey. The hypothesis of the
research was: Latvia's society is not ready to use fintech service, preferring to use
banking services instead. 378 people (representatives of legal entities interested in
using innovations in the field of financial services) from the industries represented in
Figure 1 have responded to the survey, which is still ongoing.
Figure. 1 shows the areas of activity of respondents who participated in the survey.
The largest number of respondents work as freelancers (44 percent), followed by
work in the service sector (19 percent), retail trade and information technology were
in the third and fourth place (13 and 12 percent respectively).
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Figure 1. Respondents to the Survey by Industry (authors’ calculations)
2.1 Areas of application of fintech industry innovative technology, advantages

and disadvantages of financial services in comparison with traditional
companies in the financial sector
Many papers (for example, Harrison et al., 2014) show that business innovations
stimulate economic development on both micro and macro levels. The application of
information technology in the finance industry is a field with great potential for
innovations; therefore, both enterprises and investors are highly interested in it.
Webster and Pizalla (2015) point out that competition between fintech and
traditional banking services gets more intense every year due to continuing
development of information technology. Simultaneously, fintech increases the
interest in modern financial services from progressive financial institutions that aim
to maintain and strengthen their leading role in the field and provide modern services
of high quality in a convenient and effective form for their clients anywhere,
anytime. Recently the collaboration between traditional financial institutions and
fintech branch is growing as both parties see promising avenues for further
development.
A review of the areas in which the fintech industry offers new technologies and
traditional institutions of the financial sector, with which the fintech firms want to
compete, as well as a description of the advantages and disadvantages of fintech
technology is given in Table 2.
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Table 2. Overview of the areas of application of new technologies, competitors,

advantages and disadvantages of fintech services3.
Area of Competitors: Advantages and disadvantages of
application Traditional financial sector financial services in comparison
of new companies and fintech with traditional financial sector
technology companies companies
Online  Banks; Successful competition of fintech
payments  Companies offering payments companies with banks is manifested
and money and other services (PayPal, Ant with large volumes of transactions
transfers, Financial, etc.) In Latvia: in close cooperation with the
E-commerce Weststein, Monea, Swipe, world's largest trading platforms
MeaWallet; E-commerce in Latvia eBay and Alibaba;
-eComCharge, Payment Ninja Bank competitors have much lower
transaction costs.
Lending  Banks; Successful competition of fintech

 Non-bank lending companies firms with banks began after the
for individuals and legal entities: crisis of 2008 due to the refusal by
Wonga (UK); In Latvia: banks to lend to certain groups of
4finance, CreamFinance, borrowers, incl. small enterprises,
SohoCredit; because of high risks;
 P2P, B2B lending platforms. Fintech firms, working on the peer-
In Latvia: Mintos, Viventor, to-peer (P2P) model, provide a
Twino. platform for matching borrowers
with lenders;
Banking competitors may charge
much higher loans and
commissions;
A major scandal in the history of
fintech - bankruptcy of the P2P
lending company Ezubao, operated
in China.
Asset and  Banks and institutions Fintech companies have a very
Investment dealing with asset and competitive value proposition in the
Management investment management; new technology of robo-advising,
 Crowdsourcing platforms: when an individual’s investment
crowdfunding (Indiegogo, portfolio is selected by algorithms
Kickstarter, etc.), crowd that offer clients an investment
investing. structure that corresponds to their
 In Latvia: the investment preferences and risk
brokerage company profile;
Exante Annual maintenance costs are
lower than those accepted in banks
(1-2 percent), i.e., 0.3-0.5 percent;
They allocate free assets of clients
3
The overview is compiled by authors, summarizing scientists' and experts' estimations, data
of FinTech companies.
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in deposits, convert currencies,

bond and stock portfolios, seek to
hedge risks and receive credit lines
for these assets.
Fintech firms make services that
previously were only available to
the wealthy accessible to the
general population.
Neobanks  Traditional banks; Digital banks can provide
(digital  Neobanks – mobile (digital) convenient mobile services
banks) banks sucxh as ImaginBank (in (settlement account, debit card,
Spain), EQ Bank (in Canada )- consumer loans, financial
based on traditional banks; management tools, as well as the
latest innovations in the field of
mobile and p2p-payments) on the
basis of the existing banking
infrastructure, as well as create the
infrastructure from scratch;
Fintech companies use the
flexibility of banking regulations:
in the UK, after changing the
banking legislation in 2014-2015,
five new banks were licensed;
In many cases charges for services
are lower and interest rates on
savings products are higher.
Personal  Banks; In the field of personal finance
finance  Fintech firms managing management, fintech firms (for
management, personal finances (Credit example, Credit Karma, USA)
planning, Karma, USA). In Latvia: allow users to access their credit
analytics Nordigen, Grandma, inBudget rating and credit history, as well as
keep records of all client financial
products - a free service;
Comparable products in banks used
to cost up to $100.
In planning and analytics, fintech
firms offer an online platform for
project managers to manage
budgets, invoices and reports.
Insurance  Traditional insurance Fintech firms can offer new
companies and banks; technologies in the insurance
 Digital insurers - new business instead of conservative
generation companies (Bright distribution of products through the
Health, USA). In the Baltic use of offline agent networks,
States, Estonian companies are charging up to 20 percent in the
known - Inspool, Insly form of commissions. As a result
services become cheaper.
967
Infrastructure  B2B-FinTechs offering their Technologies related to security,

and support technologies to banks and work with large data, scoring
services insurance companies or to other mechanisms for borrowers,
financial companies platforms, for example, on
arranging loans or mobile
payments;
They do not compete, but cooperate
with banks
As can be seen from Table 2, fintech firms actively and successfully offer their
technologies and services in all areas where traditional banks, insurance companies
and other financial sector companies operate. At the same time banks, despite their
inherent conservatism and caution, have already begun to actively recognize fintech,
understanding that the new technologies they offer in conjunction with banks’ large
client base, opportunities to attract low-cost resources and a robust regulatory system
that ensures clients' trust, can lay the foundations of a new generation of digital
financial institution.
Thus, the larger fintech firms become, the more they have been overlapping with
traditional financial companies. In fact, in some cases it may be difficult to
distinguish between a fintech company and a traditional bank, for example, the so-
called low-cost banks, which Hes and Jilkova (2016) define as “retail banking based
on an Internet platform” effectively combine the two. Such banks rapidly gained
clients in Czech Republic and became profitable (Hes and Jilkova, 2016). Many
experts note that the closer integration of FinTech start-ups with large traditional
companies is inevitable and is, in fact, already starting a new stage in the
development of the industry - fintech 2.0.
The development of fintech and innovative technologies such as mobile money has
been going in parallel for some time and is actively followed by regulators and
policymakers worldwide, e.g. the U.S. Federal Reserve System (Board of Governors
of the Federal Reserve System, 2015, 2016) or the Federal Deposit Insurance
Corporation (FDIC, 2016). There is abundant literature on the topic, for example,
LevyBencheton (2016) and Shrier et al. (2016) who have analyzed current regional
practices in Africa. In 2016, the question about mobile finance and digital
identification using biometrics has risen to the top level of discussion reports and
strategic plans by the World Bank (World Bank Group, GSMA, 2016, WBG, 2016)
and the World Economic Forum (WEF, 2016).
3. The Possibilities of Using Fintech in Latvia
There are few fintech enterprises in Latvia, but those firms that do work and develop
in Latvia, introduced specific upgrades in Latvia's financial market and changed the
consumers' opinion about financial services, their quality and speed of provision of
the service. The most popular fintech start-up enterprises are Dacta, Swipe.lv,
968
Monea, Mintos, Twino and several others.
The authors conducted a survey of start-up businesses, who would be interested in

using innovations in financial services, from industries such as manufacturing,
information technology, freelancers, services, energy, retail trade (Figure 1). The
survey was carried out using a questionnaire that was posted on social networks, as
well as offered at seminars for professionals and entrepreneurs and 378 people have
responded to the survey, which is still ongoing.
Most respondents were women (about 70 percent of all respondents, which is

explained by their greater willingness to participate in surveys) at the age of 25 to
30, who could be considered part of the millennial generation, most ready to accept
innovations in financial services.
The survey was started at the end of 2016 (Kims, 2017) and continue because the
authors believe that involving respondents in the survey simultaneously means
informing them about the services offered to increase interest in their use. Gathering
further survey responses would further increase the statistical power or survey
results, which for now can be used only as an indicative guide to reveal the
preferences of the population.
Respondents were asked about alternative banking service providers in Latvia. There
was a slight misunderstanding regarding the term “alternative banking service
providers”. At first, when the respondents heard the words “alternative banking
service providers”, they thought that they were asked to provide their opinion about
fast lending companies, so the question had to be clarified to reveal respondents’
opinion about fintech companies.
The survey asked the respondents to rate their satisfaction with different aspects of
banking services as well as alternative financial services providers in Latvia on a
five-point scale. The results are shown in Figure 2. In general, the respondents
appreciated the protection of client data in banks, as well as the speed and accuracy
of bank transfers as good and very good. However, respondents noted that the
attitude of Latvian banks towards new entrepreneurs is such that it is practically
impossible for them to get financing for their businesses, even if there is a stable
cash flow of the company. Interestingly, the same attitude could hamper the
development of fintech start-ups in Latvia as well. Risk capital funds in Latvia rarely
invest in small enterprises, such as fintech, because the risk of loss is higher than
from enterprises with stable profit and money flow. At the same time access to
finance is one of the critical ingredients for the success of a small or medium
enterprise (Mareš and Dlaskova, 2016), so to the extent that fintech can contribute to
alleviating it, it can make an important contribution in the development of the
overall economy in which SMEs play a crucial role.
969
Figure 2. Survey respondents’ satisfaction with the services provided by the bank
(authors’ calculations).
Very Good
Good
Average Almost
Average
Bad
0% 10% 20% 30% 40% 50% 60% 70%
Data Protection in Your Chosen Bank
Alternative Financial Service Providers in
Latvia Annual Price Increases in the Banking
Services Services Provided by the Bank
Unsurprisingly, most respondents viewed the annual growth of bank commissions

for the services provided unfavourably. Also, in the majority of cases, the recently
adopted Cabinet Regulations 20 “Procedures for Financial Institutions on
Performing Due Diligence of the Financial Accounts and Submitting Information on
Financial Accounts to the State Revenue Service” (Government of Latvia, Cabinet
of Ministers, noteikumi Nr.20, 2016.) were not evaluated positively either by legal
entities or individuals, since the respondents believe that this does not contribute to
the protection and confidentiality of data on the status of clients' accounts, while
illegal transactions are carried out mainly not by using online banking, but in cash.
The respondents were also asked about alternative financial service providers. Low
awareness of respondents about fintech services was manifested in the fact that the
most common initial reaction to the question was that the respondents thought that
the question was about non-bank providers of quick loans. After explanations, the
majority of respondents noted their willingness to positively assess the possibility of
using such services, since this will create competition for large banks and limit their
ability to dictate their terms. The majority of respondents felt positive about fintech
companies entering the market, because it keeps the largest banks like Swedbank or
SEB Bank from maintaining and dictating their own market rules. When there is an
innovative competitor, market participants tend to improve their offerings or lower
prices thereby benefiting clients. Therefore, the expansion of fintech in the field of
financial services will work for the benefit of their users, especially services such as
P2P lending and digital payments using peer to peer platforms. This is evidenced by
the pace of investment in fintech companies in Europe, Asia and the United States.
Forty percent of respondents noted that they have an interest in using non-bank
financial services in their businesses, and they have experience in using such
services, mainly in online payments and money transfers. This means that this
970
percentage is already so large that the popularization of the provided fintech services
could be effective.
On May 27th, 2017, Latvian government adopted the Latvian Financial Sector’s
Development Plan 2017-2019 (Government of Latvia, Cabinet of Ministers,
rīkojums Nr. 126, 2017). If in previous similar plans the main goal was to ensure the
stability of the financial sector, the newly adopted plan, while not neglecting that
earlier goal, also aims to look for ways of developing the financial sector, especially
by promoting the export opportunities of financial technologies. The first steps in the
development of FinTech companies in Latvia show that many Latvian companies,
for example, Mintos, 4finance and others can create and export competitive financial
technologies on a world-wide basis.
As one of the most important priorities, the Plan puts forward digitalization and
innovations in the financial sector, which is where fintech firms operate. It is
encouraging that for Latvia fintech companies have become an object of interest
from the government, since their activities allow diversifying the services of the
financial sector by offering financial non-banking services to clients. How could the
Latvian state stimulate the development of innovative financial services?
There are at least three avenues for exploration. First, the government could
encourage the creation of a platform (sandbox) allowing innovative financial
technologies to enter the market and validate their safety. Second, there needs to be
an understandable and transparent system of supervision over the activities of fintech
firms, especially the P2P and B2B lending platforms. Third, the government could
create a program of tax incentives stimulating investments in the financial sector. As
suggested by Menshchikova and Sayapin (2016), taxation system can be a powerful
resource for stimulation of domestic investment at the state level. For example, in
the UK, where the investor, who invests in enterprises on the list giving the right to
receive tax benefits, receives a privilege to reduce corporate income tax payments to
the budget by up to 50 percent.
4. Conclusions and Recommendations
This paper provided an overview of the trends in the development of the fintech
industry. The development of fintech was due to globalization giving a chance to
small but sophisticated enterprises to develop financial services without the help of
banks, by combining finance with IT, and offering consumers faster execution of
typical banking processes.
Their development in Latvia has been relatively slow, including due to credit
constraints faced by all young businesses in Latvia. This paper posed a hypothesis
that Latvian society is not ready to use fintech services preferring bank services
instead. The survey of young entrepreneurs found some supporting evidence for this.
Notably, Latvian society isn’t properly informed about new innovations and new
971
financial products, because a lot of respondents did not know about fintech services
in Latvia.
Having analysed and summarized the trends of the fintech sector development, the
authors are sure that the new fintech technologies together with the traditional
services and achievements of banks (a large client base, an opportunity to attract
large volumes of cheap financial resources, trust from clients) are the basis for the
formation of digital financial companies of a new generation. Therefore, the
fintech’s development is necessary for both global and Latvian financial sectors,
since this will allow clients to use the opportunities and advantages of both the
traditional banking system and fintech companies. One can expect that fintech
technologies will change the traditional activity of banks - banks will adopt
innovative IT technologies, and fintech companies will have to work in conditions of
more stringent supervision to ensure the safety of client operations. Such
convergence will mark the beginning of a new era in the development of the
financial industry.
Several recommendations can be addressed to managers of fintech enterprises,

association of start-up enterprises and risk capital funds:
 Excessively strict licensing regulations in Latvia are one of the main
drawbacks preventing fintech development. Worldwide experience suggests that
reinforcing lobbying and collaboration with State institutions has helped fintech
start-up enterprises to enter the market, gain consumers and regulators’ trust and
attract investors. This experience could prove useful in Latvian circumstances.
 Association of start-up enterprises should inform the population about
fintech services that are already available for use.
 Risk capital funds need to support new companies in this field because they
have a large potential to develop and grow not only in Latvia's but also Baltic and
European international markets;
 Fintech firms have to create impactful marketing campaigns enhancing the
public’s awareness.
Finally, Latvian government should stimulate the implementation of financial
services at least in three directions:
 By creating a platform (sandbox) allowing innovative financial technologies
to enter the market and validating their safety;
 By creating an understandable and transparent system of supervision over
the activities of fintech firms, especially the P2P and B2B lending platforms;
 By creating a program of tax incentives stimulating investments in the
financial sector.
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Electron Markets (2018) 28:245–264
https://doi.org/10.1007/s12525-017-0275-0
RESEARCH PAPER
Understanding FinTech start-ups – a

taxonomy of consumer-oriented service
offerings
Henner Gimpel1 & Daniel Rau 1 & Maximilian Röglinger1
Received: 17 November 2016 / Accepted: 18 October 2017 / Published online: 8 November 2017
# The Author(s) 2017. This article is an open access publication
Abstract The financial sector is facing radical transforma-

Keywords Financial services . Financial
tion. Leveraging digital technologies to offer innovative
technology . FinTech . Business model . Services .
services, FinTech start-ups are emerging in domains such Taxonomy
as asset management, lending, or insurance. Despite
increasing investments, the FinTech phenomenon is low
on theoretical insights. So far, the offerings of FinTech Introduction
start-ups have been predominantly investigated from a
functional perspective. As a functional perspective does The financial sector is facing radical transformation.
not suffice to fully understand the offerings of FinTech FinTech start-ups, an abbreviation for financial technology
start-ups, we propose a taxonomy of non- functional start-ups, revolutionize how customers experience financial
characteristics. Thereby, we restrict our analysis to services (Mackenzie 2015). Leveraging digital
consumer-oriented FinTech start-ups. Our taxonomy technologies, FinTech start-ups offer innovative financial
includes 15 dimensions structured along the perspectives services and boost devel- opments in domains such as
interaction, data, and monetization. We demonstrate the payment, wealth management, or trading (Chuen and Teo
applicability of our taxonomy by classifying the offerings 2015; Kim et al. 2016). For instance, TransferWise offers
of 227 FinTech start-ups and by identifying archetypes via international money transfer online and at low cost.
a cluster analysis. Our taxonomy contributes to the Wealthfront, another FinTech start-up, unleashes the
descriptive knowledge on FinTech start-ups, enabling potential of private wealth management to low-income
researchers and practitioners to analyze the service individuals.
offerings of FinTech start-up in a structured manner. Considering the previous development in electronic
markets, the FinTech phenomenon is a logical
evolutionary step. It was the Internet that enabled e-
JEL classification M13 . N2 . N7 . O3 commerce in the 1990s, followed by dynamic Web
services, standardization, and the integration of e-business
technologies in enterprise applications. In recent years,
the mobile channel, cloud-based ser-
vices, and big data analytics drove the transformational shift
Responsible Editor: Rainer Alt to consumerization, i.e., the offering of user-centered life
solutions in areas such as health, mobility, or finance (Alt
* Daniel Rau
and Zimmermann 2014). In today’s financial services
[email protected]
sector, FinTech start-ups offer consumer-oriented banking,
Henner Gimpel insurance, and other financial services (Alt and Puschmann
[email protected] 2012). They are the key innovation driver with experts
Maximilian Röglinger predicting a very promising future. In 2014, global
[email protected] investments in FinTech tri- pled to more than USD 12
billion (Dietz et al. 2015), and in 2015, investments
1
FIM Research Center, University of increased even further (Mead et al. 2016). Offering
Augsburg, 86135 Augsburg, Germany
innovative financial services as asset- organizations, FinTech start-ups evolve into
light and compliance-easy
246 H. Gimpel et al.
challenging competitors and strong allies of traditional FinTech start-ups, we investigate the following research
financial institutions (Chuen and Teo 2015). By 2020, question: What are the non-functional
FinTech start-ups are estimated to handle over 20% of the characteristics of consumer-oriented FinTech start-up
financial service business (Kashyap et al. 2016). service offerings?
Accordingly, traditional financial institutions massively To answer our research question, we propose a
invest in the digitalization of their services. For instance, taxonomy that helps classify FinTech start-up service
Germany’s largest bank announced to invest EUR 1 offerings. To do so, we iterate the taxonomy development
billion in digitalization until 2020 (Deutsche Bank 2015), process of Nickerson et al. (2013). Structured along the
and the second largest Spanish bank has invested an annual perspectives interaction, data, and monetization, we derive
average of around EUR 800 million since 2011 (BBVA 15 dimensions and related characteristics from the
2015). Traditional institutions increasingly aim to benefit literature and exemplary FinTech start-ups. We validated
from alliances with FinTech start-ups, setting up venture our taxonomy by classifying the offerings of 227 FinTech
capital funds beyond USD 100 million (Dany et al. 2016). start-ups, identifying archetypes per perspective using
Due to these high investments and the central role of hierarchical clustering, and examining relationships
FinTech start-ups in the financial sector, it is worthwhile to among these archetypes.
strive for an in-depth understanding of the service Our taxonomy addresses two user groups: researchers,
offerings of FinTech start-ups. who analyze FinTech start-ups and develop theories in this
Despite the rising importance of FinTech start-ups, the field, and practitioners, who design or evaluate FinTech
FinTech phenomenon is low on theoretical insights. Academic start-ups and their offerings. Both groups can use our tax-
insights are scarce and most related publications are onomy for gaining a deeper understanding of the FinTech
commercial reports (Zavolokina et al. 2016). Today, we do not phenomenon, identifying core dimensions of FinTech start-
fully understand how the service offerings of FinTech start- up service offerings, defining typical service charac-
ups can be characterized, what they have in common, and teristics based on our taxonomy, analyzing the market of
how they differ. FinTech services are usually classified from consumer-oriented FinTech start-ups, and identifying
a functional perspective including domains such as account comparable non-competitive services.
management, savings, or crowdfunding (Dany et al. The remainder of this paper is structured as follows.
2016; Dietz et al. 2015; Gulamhuseinwala et al. 2015). First, we provide background information about FinTech
While the functional perspective helps group FinTech start-ups start-ups and existing service taxonomies. Second, we
with respect to what they do for customers, it does not suffice outline our research method. Third, we present our
to fully understand how FinTech start-ups configure their taxonomy of FinTech start-up service offerings. Fourth, we
offerings. What is missing is a non- functional view on the apply our taxonomy to 227 real-life examples and identify
service offerings of FinTech start-ups that abstracts from archetypes via cluster analysis. Fifth, we discuss the
FinTech start-ups’ specific function for consumers (O’Sullivan implications and limitations of our work. We conclude
et al. 2002). A non-functional classification of FinTech with a brief summary and outline of future research
services will help understand both the FinTech phenomenon opportunities.
and the role of FinTech start-ups in the financial sector.
Especially for consumer-oriented FinTech start-ups, we
expect a large increase of knowledge. In particular, we are Domain background
interested in the interaction between start-ups and
individual consumers, as consumerization and the FinTech and FinTech start-ups
provision of customer- centric life solutions are major
trends in the electronic markets field (Alt and Puschmann FinTech is the abbreviation of Bfinancial technology,^ which
2012). Further, more information is publicly available about is a blend of Bfinancial services^ and Binformation
consumer-oriented FinTech start-ups. Therefore, we focus on technology^ (Oxford English Dictionary n.d.). The term
consumer-oriented FinTech start-ups, excluding start-ups FinTech was first used in the early 1990s in the name of a
that primarily address businesses, focus on financial project by Citigroup predecessor to foster technological
services providers’ internal processes, or facilitate collaboration (Hochstein 2015). Since 2014, it has gained
exchange between two or more financial service providers attention in contexts such as innovative business models
without consumer involvement. We focus on FinTech start- (Google 2016). Despite low theoretical insights into the
ups, as they represent the spearhead of innovation in the fi- FinTech phenomenon, we draw from its few mentions in
nancial sector, while traditional institutions struggle to academic literature and perspectives from commercial
cope with legacy systems and structures. Further, FinTech publications to derive a working definition, veri- fied by
start-ups are less understood and, thus, call for more observations made during our study.
intense research compared with FinTech-based services of Academic and commercial literature characterizes FinTech
traditional financial institutions. As existing classification differently. Generally, FinTech is referred to as innovative and
schemes for FinTech and services do not cover the non- personalized financial services and products (Allen and Overy
functional perspective of LLP 2015; Chuen and Teo 2015; Dany et al. 2016; Dapp
2014,
Understanding FinTech start-ups – A taxonomy of consumer-oriented service offerings 247
growth (Dietz et al. 2015; Gulamhuseinwala et al. 2015). In
2015; Dietz et al. 2015; Gulamhuseinwala et al. 2015; Kim et 2014, over three-
al. 2016). Whereas Drummer et al. (2016) as well as
Gulamhuseinwala et al. (2015) relate FinTech to business
models, Kim et al. (2016) consider it an entire sector.
Zavolokina et al. (2016) summarize that either new services,
products, processes, or business models emerge with FinTech.
Dany et al. (2016) highlight customer centricity as a
constitutive characteristic of FinTech services (Chuen and
Teo 2015; Gulamhuseinwala et al. 2015). All sources agree
that FinTech leverages digital technologies such as the
Internet, Internet of Things, mobile computing, and social
media (Allen and Overy LLP 2015; Chuen and Teo 2015;
Dany et al. 2016; Dapp 2014, 2015; Dietz et al. 2015;
Drummer et al. 2016; Gulamhuseinwala et al. 2015; Kim et
al. 2016; Zavolokina et al. 2016). Many sources also mention
the use of data analytics and artificial intelligence (Allen and
Overy LLP 2015; Dany et al. 2016; Dapp 2014, 2015). By
leveraging emerging digital technologies, FinTech enables,
innovates, and disrupts the financial services market (Allen
and Overy LLP 2015; Gulamhuseinwala et al. 2015; Kim et
al. 2016; Zavolokina et al. 2016). Zavolokina et al. (2016)
argue that, besides technology, FinTech is a development
within start-ups and established companies nurtured by
substantial monetary investments. Distilling the essence of the
definitions above, we define FinTech and FinTech start-ups as
follows:
FinTech characterizes the usage of digital

technologies such as the Internet, mobile computing,
and data analytics to enable, innovate, or disrupt
financial services.
FinTech start-ups are newly established businesses
that offer financial services based on FinTech.
Today, FinTech start-ups cover many consumer-facing

elements of the financial value chain. Table 1 overviews
major groups of financial services and exemplary FinTech
start-ups. Apparently, most FinTech start-ups address one
particular financial service such as money transfer or
trading.
From an industry perspective, FinTech start-ups are typi-
cally non-financial businesses such as technology-driven
companies and online businesses (Dapp 2014, 2015;
Gulamhuseinwala et al. 2015; Kim et al. A20lt1h6o)u.
gh
some start-ups hold a full banking license (e.g., N26), most
do not. To offer services that require a full banking license
or to leverage the regulatory and risk management
experience of traditional financial institutions (The
Economist Intelligence Unit 2015), some FinTech start-
ups, such as auxmoney, collaborate with traditional
financial institutions (Dany et al. 2016; Dapp 2015;
Gulamhuseinwala et al. 2015) or newly established Bwhite
label^ banks such as solarisBank.
With multiple venture-capital investments in recent years,
the FinTech start-up development rapidly accelerated
globally, unfolding its full dynamics with tremendous
1988), structure the role of technology in service
quarters of the global FinTech investment was spent in the provision (Fitzsimmons and Fitzsimmons 2008; Froehle
US, 10%–15% in Europe, and 5%–10% in Asia (Dietz et al. and Roth 2004), and discuss non-functional service
2015). Because of low bureaucratic boundaries, deep properties (O’Sullivan et al. 2002). Though being
understanding of customer needs, and dynamic teams with insufficient to fully understand the service offerings of
high technical skills, FinTech start-ups stand out with short FinTech start-ups, these taxonomies are a good starting and
development cycles and time-to-market. Though they follow reference point. Below, we introduce service taxonomies
a customer-centric strategy, long-term success rates are not relevant for our purposes (Fitzsimmons and Fitzsimmons
yet available and earnings remain uncertain. However, they 2008; Leimeister 2012; Meffert and Bruhn 2009; Park et
are attractive to traditional financial institutions, which al. 2012.
already invested in FinTech partnerships, ac- quisitions, and Guile and Quinn a1s9s8if8ycslervices based on their role
internal incubators to expand their service portfolios to in an economy. Such roles are financial, government, or
reach new customer segments and enrich customer expe- infra- structure services. Accordingly, services are an
rience (Dany et al. 2016). integral rather than a peripheral part of the economy
(Fitzsimmons and Fitzsimmons 2008). Froehle and Roth
Service taxonomies (2004) focus on the role of technology in service
encounters, presenting five archetypes of technology-
The term Btaxonomy^ is often used interchangeably with related customer contact. In the technology-free mode,
Bframework^ or Btypology^. Taxonomies help structure and the service encounter involves interactions between
organize knowledge, grouping objects from a distinct customers and human service providers. In the technology-
domain based on common characteristics and explaining the assisted mode, only the service representative uses
relationships among these characteristics (Cook et al. 1999; technology. The technology-facilitated mode allows cus-
Nickerson et al. 2013). Taxonomies are needed if little tomers and service representatives to use the same
knowledge is available (Gregor 2006). As FinTech is an technology. There is no face-to-face contact in the
emerging phenomenon, there is little guidance on the technology-mediated mode via communication technology
analysis of existing and the design of new FinTech start-up and the technology- generated mode where human service
service offerings. providers are entirely replaced by technology. Based on the
In the literature, there are taxonomies that differentiate triad of customers, contact personnel, and service
financial services from other services (Guile and Quinn organization, Fitzsimmons and Fitzsimmons (2008)
differentiate services by the party that
Table 1 Major functional domains of financial services and exemplary FinTech start-ups
Functional domain Justificatory references FinTech start-up examples
Account management Dietz et al. (2015), Drummer et al. (2016) Centralway Numbrs, N26
Asset management, investments, and savings Dany et al. (2016), Dietz et al. (2015), Drummer et al. Digit, Wealthfront
(2016),
Gulamhuseinwala et al. (2015)
Crowdfunding / crowdinvesting Chuen and Teo (2015), Dany et al. (2016) Bergfürst, Funding
Circle Cryptocurrencies Chuen and Teo (2015), Dany et al. (2016) bitcoin.de, Xapo
Financial planning Dany et al. (2016) Betterment, LearnVest
Insurance Dany et al. (2016), Gulamhuseinwala et al. (2015) Coverfox, Friendsurance
Lending and financing Dany et al. (2016), Dietz et al. (2015), Drummer et al. Affirm, Avant
(2016), Gulamhuseinwala et al. (2015)
Payment and money transfer Chuen and Teo (2015), Dany et al. (2016), Dietz et al. goHenry, TransferWise
(2015), Drummer et al. (2016), Gulamhuseinwala et al.
(2015)
Peer-to-peer lending Chuen and Teo (2015) auxmoney, Lending Club

Trading Dany et al. (2016) eToro, Robinhood
Others – BankingCheck, CreditKarma
dominates the service encounter. In service-organization- dominated encounters of Fitzsimmons and

dominated encounters, service provision is highly
standardized, while personalization via contact personnel
is limited or fully restricted. In contact-personnel-
dominated encounters, customers have little control as
they are in a subordinate position. In customer-dominated
encounters, either a high degree of personalization and
customization or full control over self-service fosters
customer sovereignty. Finally, O’Sullivan et al. (2002)
describe non-functional properties as character- izing
services independent from their application domain or
function to the customer. O’Sullivan et al. (2002) suggest
distinguishing services by temporal and spatial availability,
channels used for customer-company interaction, charging
styles used for monetization, settlement as mutual
obligations of the service provider and requester, payment
obligations included in settlement contracts, service quality
as difference between expected and actual service
provision, security and trust as foundational properties, and
ownership and rights associated with service delivery.
In line with the service taxonomy of Guile and Quinn
(1988), FinTech start-up service offerings can be classified
as financial services. However, this taxonomy does not
enable further differentiating financial services. Following
the taxonomy of Froehle and Roth (2004), FinTech start-
up service offerings can feature all modes of technology in
the service encounter except for the technology-free and
-assisted modes. Due to their use of digital technologies,
most FinTech service offerings are technology-mediated or
-generated. Though not fully explaining the differences
between FinTech start-up service offerings, the ideas of
Froehle and Roth (2004) can be incorporated in the
development of our taxonomy, shedding light on the role of
technology in the interaction between FinTech start-up and
consumer. In line with the main idea of FinTech start-ups,
most service offerings can be classified as customer-
Fitzsimmons’ (2008) service taxonomy. The service Research method
taxonomy of O’Sullivan et al. (2002) suggests
dimensions that can be incorporated in the development of In this study, we combine qualitative and quantitative
our FinTech taxonomy. Basically, FinTech start-up service research (Bryman 2006). In the qualitative part, we
offerings are accessible without temporal or spatial develop a taxonomy of FinTech start-up service offerings.
restrictions. Due to regulatory or economic reasons, there In the quantitative part, we apply our taxonomy to classify
may be national boundaries of service availability. real-life examples and group them using cluster analysis.
Further, FinTech start-ups use digital channels and vary in This section focuses on the taxonomy development
their charging style, settlement, payment obligations, process. Details on the cluster analysis can be found in
service quality, security and trust, and ownership and the application section.
rights. The service taxonomy of O’Sullivan et al. (2002) as Figure 1 shows the iterative taxonomy development
a whole is not sufficient to answer our research question process as per Nickerson et al. (2013) that consists of seven
as important dimensions such as personalization or use of steps. After the definition of a meta-characteristic, which
data are missing. As these taxonomies do not fully explain serves as foundation for all other characteristics of the
FinTech start-up service offerings from a non-functional taxonomy, objective and subjective ending conditions are
perspective, we designed a new taxonomy that includes defined. For each iteration of steps 3 to 7, the empirical-to-
relevant dimensions from extant taxonomies. conceptual (inductive; in case of sufficient real-world data) or
conceptual-to-empirical approach (deductive; leveraging
knowledge of the authors and from the
Fig. 1 Taxonomy development

process in information systems
literature) can be chosen. In an empirical-to-conceptual itera- (Baden-Fuller and Haefliger 2013; Clemons 2009; Skilton
tion, a sample of real-world objects is drawn from which 2015). This shift can also be observed in other industries. For
common characteristics are derived and grouped into example, Facebook offers its users a free social network, but
dimensions. In conceptual-to-empirical iterations, earns money by allowing companies to conduct target
characteristics and dimensions are derived based on the marketing based on user data. During the taxonomy
authors’ knowledge and from the literature related to the development process, we checked if a major perspective is
meta-characteristic. These con- ceptually derived missing in our taxonomy. However, all identified non-
characteristics and dimensions are then veri- fied against real- functional characteristics and dimensions could be matched
world objects. The taxonomy is revised after each iteration. to one of the three perspectives just outlined. Thus,
The taxonomy development process iterates until the interaction, data, and monetization are essential when
ending conditions are met. systematizing the service offerings of consumer-oriented
We iterated the taxonomy development process as follows: FinTech start-ups. Our taxonomy does not claim to cover the
As for the meta-characteristic in step (1), we chose Bnon-func- entire business model of FinTech start-ups, as this would
tional characteristics of consumer-oriented FinTech start-up ser- require investigating other perspectives such as ownership
vice offerings in the perspectives interaction, data, and structure, funding, and employee structure. Instead, our
monetization^. Compared with traditional financial institutions, taxonomy focuses on non-functional properties of such service
FinTech start-ups do not have completely different service offerings.
offerings. However, differences can be observed in three As for the ending conditions in step (2), we chose Bat
areas. Due to the consumerization trend in the electronic least one object is classified under every characteristic of
markets field (Alt and Zimmermann 2014) and in line with every dimension,^ Bno new dimensions or characteristics
service-dominant logic that describes value co-creation as were added in the last iteration,^ and Bno dimensions or
essential for services (Vargo and Lusch 2004), it is important characteristics were merged or split in the last iteration^
to understand the interaction between FinTech start-ups and from the list of objective ending conditions proposed by
customers (Setia et al. 2013). Further, data processing has Nickerson et al. (2013). If the taxonomy is considered
always been at the core of financial services. Nowadays, concise, robust, comprehensive, extendible, and
technology not only changes the interaction between service explanatory, we assumed subjective ending conditions to
providers and customers, but also expands the role and be met (Nickerson et al. 2013).
possibilities of data analytics (Baesens et al. 2016). Finally, In four iterations of steps (3) to (7), we used the
new monetization models emerge as users of financial conceptual-to- empirical (iteration 1) and empirical-to-
services need not necessarily pay for services with money conceptual (iterations 2 to
4) approach to derive a diverse set of characteristics and
dimensions. In iteration 1, we examined the literature on
existing service
taxonomies, FinTech, customer-company interaction, data pro- non-functional dimensions and characteristics included in
cessing, and monetization. We also incorporated our knowledge our taxonomy structured along the perspectives interaction,
about the FinTech phenomenon gained through conferences, data, and monetization. Table 2 also indicates whether the
pre- sentations, newspaper articles, FinTech start-ups, and dimensions are exclusive or non-exclusive and in which
discussions with representatives of financial service providers iteration the dimensions were added or revised. As for
(Nickerson et al. 2013). On this foundation, we identified 24 exclusive dimensions, exactly one characteristic can be
characteristics along 11 dimensions (i.e. personalization, observed at a time, such as either Bpersonalized^ or Bnot
information exchange, user network, role of IT, hybridization, personalized^ in the dimension Bpersonalization^. For non-
channel strategy, data type, payment schedule, user’s currency, exclusive dimensions, multiple characteristics can be
partner’s currency, and business cooperation). In all other observed in one service offering, such as Buser^ and
iterations, we chose the empirical- to-conceptual approach and Bpeer^ data in the dimension Bdata source^. To develop a
examined sample FinTech start-ups collected from four sources. future-looking taxonomy, we grounded the exclusiveness
To allow for replication, we searched publicly available of the included dimensions on theoretical possibility
FinTech start-up databases in the Internet that cover the instead of on currently observable real-life examples.
FinTech market at an international scope and across Below, we introduce the dimensions and non-functional
functional domains. In iteration 2, our source was characteristics in detail together with justificatory
Paymentandbanking.com (Bajorat 2015), an online blog references. We show an application of our taxonomy in one
observ- ing the FinTech market with a focus on German- of the following sections.
speaking countries since May 2011. We filtered Bajorat’s list
for service offerings of consumer-oriented FinTech start-ups Interaction
and extracted 111 (out of 198) real-life examples. Analyzing
these real-life examples, we extended our taxonomy by 11 The first perspective refers to the interaction between
characteristics along 4 dimensions (i.e. interaction type, data FinTech start-ups and customer. It comprises seven
source, time horizon, and data usage). In iteration 3, we drew a dimensions, i.e., personalization, information exchange,
random sample of 270 FinTech start-ups (among 878 interaction type, user network, role of IT, hybridization,
internationally active companies labeled BFinTech^) from and channel strategy.
CrunchBase (2016), which claims to be the primary source of
company intelligence to millions of users comprising hundreds & Personalization – Personalization describes the
of thousands of start-up entries. As some start-ups focus on customization of content and content presentation.
business-to-business (B2B) interactions or are no real FinTech FinTech start- ups can provide their users with the
start-ups, we filtered the sample for 88 consumer- oriented possibility to personalize services on their own (Wells
FinTech start-ups, thereof 83 not considered in previous and Wolfers 2000; Zhang et al. 2005). If a service is
sources. As a result, we revised the dimension Bdata usage^ personalized, it can be adapted to the individual needs
from two to three characteristics; that is, we split the of a particular user or user group. Not personalized
characteristic Banalytical^ into Bbasic analytical^ and services are offered in a standardized way without
Badvanced analytical.^ In iteration 4, we extended our sample significant personalization.
with two reports: the BFinTech 50^ report by Forbes & Information exchange – Information exchange captures
Magazine (Sharf 2015) that contains 50 FinTech start-ups how interactions between a FinTech start-up and its
with focus on the US and the BFinTech 100^ report by users are triggered (Ma 2015; Xu et al. 2010). Pull
KPMG and H2 Ventures (Toby and Pollari 2015) that includes services provide or exchange information only after the
50 leading and 50 emerging FinTech start-ups. Both lists user has accessed the service. Push services inform
contained 72 so far unconsidered consumer-oriented FinTech users regularly or based on events, e.g., with
start-ups. In this iteration, we derived no additional notifications on mobile devices, emails, or text
characteristics, as the additional sample confirmed the existing messages.
characteristics and dimensions of our taxonomy. Based on the & Interaction type – The interaction type systematizes the
mentioned sources, we are convinced to have a large and role of FinTech start-ups in the interaction with their users
cross-functional coverage of the international FinTech market. (Chircu and Kauffman 1999). Direct interaction reflects
After the fourth iteration, all objective and subjective ending one-on-one service delivery from the FinTech start-up to
conditions were met and we agreed on the final set of non- the user. An intermediary is a service that brings together
functional characteristics and dimensions. users with other businesses or with other users. A
marketplace is a specific form of an intermediary that
explicitly lists the offers of business partners or other
Taxonomy of FinTech start-up service offerings users that can be accepted by the users of the FinTech
start-up service offering.
We now present our taxonomy for service offerings of & User network u–sTerhneetwork dimension mainly repre-
consumer-oriented FinTech start-ups. Table 2 overviews sents the extent to which a service offering enables
the communication among users of the FinTech service
(Lesser and Fontaine 2004). A user network is isolated, if no
Table 2 Taxonomy of the service offerings of consumer-oriented FinTech start-ups
Perspective Dimension Characteristics E/N1 It.2

Personalization not personalized personalized E 1
Information exchange pull push N 1
Interaction type Direct intermediary marketplace E 2
Interaction User network isolated interconnected E 1
Role of IT technology-mediated technology-generated E 1
Hybridization service-only with physical product E 1
Channel strategy digital exclusive digital non-exclusive E 1
Data source user peer public N 2
Time horizon historic current predictive N 2
Data advanced
Data usage transactional basic analytical N 2+3
analytical
Data type structured unstructured N 1
Payment schedule none transactional subscription N 1
User’s currency attention data money E 1
Monetization
Partner’s currency none money E 1
Business cooperation stand-alone ecosystem E 1
1
E = Exclusive dimension (one characteristic observable at a time); N = Non-exclusive dimension (potentially multiple characteristics observable
ata time) 2 Iteration in which the dimension was added or revised
communication is enabled between individual users.

Services with an interconnected user network facilitate the allow for using parts of the FinTech service without
exchange among users through a user community or inter- digital channels.
user contacts.
& Role of IT – Froehle and Roth (2004) differentiate five
archetypes of technology in service encounters. As we Data
consider technology-driven FinTech start-up services,
only face-to-screen contact is relevant to the The second perspective characterizes the processing of
interaction between users and FinTech start-ups. In data by FinTech start-ups. This perspective comprises four
technology- mediated service encounters, users and dimensions, i.e., data source, time horizon, data usage,
service agents are not co-located, but their interaction is and data type.
carried out via technology. Technology-generated
means that no service agent is directly involved. & Data source – The data source dimension differentiates
& Hybridization – The hybridization dimension refers to the service offerings of FinTech start-ups by the data
FinTech start-up’s possibility of offering bundles of sources they use (Janssen et al. 2012; Linoff and Berry
physical products and services that are called hybrid 2002). User data relates to personal, transactional, and
products (Berkovich et al. 2009; Park et al. 2012). If the behavioral data of individual users, whereas peer data
Fintech service is provided with a physical product, a refers to the data of other users or customers. Public
physical product (e.g., a credit card required to handle data covers data that is not directly related to users or
transactions) is integrated in the core service offering. customers such as open data.
Service-only means that no physical thing is required for & Time horizon – The time horizon of data involved in
service delivery beyond a mere access point to the Internet FinTech services ranges from historic over current data to
such as a smartphone or a Desktop PC. future or predictive data (Armstrong 2002). Transaction
& Channel strategy – The channel through which a histories or historic stock trends are examples of historic
FinTech start-up offers its service is captured by the data, whereas user inputs and results of data processing
channel strategy dimension. All FinTech start-ups use represent current data. Predictive data result from
digital channels, but their services can also be delivered analyzing current and historic data with statistical
in a multichannel way (O’Sullivan et al. 2002; Sousa techniques.
and Voss 2006). Digital exclusive FinTech services re- & Data usage – The data usage dimension distinguishes
strict interactions to digital channels, e.g. an Internet whether FinTech start-up service offerings process data
website or Mobile app. Digital non-exclusive services t ransact i onal l y or anal yt i cal l y (Bose 2009 ).
Transactional data usage means that data are primarily
processed for a single transaction. We refer to basic
analytical as the use of filters, aggregations, simple Eisenmann et al. 2006; Rysman
calculations, comparisons, and techniques of similar
analytical intensity. Advanced analytical represents the
use of more sophisticated methods such as prediction
models, complex calculations, clustering, and
comparable methods.
& Data type – The data type dimension reflects that
FinTech start-up service offerings process data with
different formats and degrees of structure (Baars and
Kemper 2008; Weglarz 2004). Structured data
correspond to data with predetermined types and well-
defined relationships (e.g. normalized database
schemas). Unstructured data, in con- trast, comprise
full-text documents without further seman- tics,
images, videos, or audio files.
Monetization
The third perspective describes how FinTech start-ups

monetize their service offering. It comprises four
dimensions, i.e., payment schedule, user’s currency,
partner’s currency, and business cooperation.
& Payment schedule – The payment schedule dimension

differentiates the regularity of payments from users or
business partners. Alternatively, a service offering can
be free of charge (Fishburn and Odlyzko 1999;
O’Sullivan et al. 2002; Postmus et al. 2009). With a
transactional payment schedule, money is charged
based on the actual usage ofa FinTech service. In case
ofa subscription model, a fixed fee is charged per unit
time regardless of actual usage. If the service offering
is free of charge, then the payment schedule is
classified as none.
& User’s currency – In the FinTech context, users need not
necessarily pay with money to use a service. For instance,
a FinTech start-up can implement a two-sided market and
incorporate two value delivery systems with different
pricing strategies. This results in valuable cross-side
network effects for the two-side service provider. The
user’s currency dimension covers the currency with
which the users pays for using a service (Baden-Fuller
and Haefliger 2013; Eisenmann et al. 2006; Rysman
2009). FinTech start-ups can monetize their services by
offering users’ attention to business partners such as
advertisers or to other fee-based services within and with-
out the start-up. If the user’s currency is data, then the
service monetizes user data within or without the FinTech
start-up. However, the service can also be monetized by
letting users pay with their money.
& Partner’s currency –FinTech start-ups partnering with
another business can monetize their services by
offering the attention or data of its users to this
business partner. The partner’s currency dimension
represents if and how a business partner pays to the
FinTech start-up (Baden-Fuller and Haefliger 2013;
2009). Business partners, such as advertisers or create the taxonomy. The definition of characteristics and
vendors that benefit from user data or an attractive dimensions from the preceding section served as a codebook
user base, can compensate the FinTech start-up with for the classification. To ensure quality, all authors discussed
money. In case there is no business partner involved the classification of randomly drawn examples, extreme
in the core service offering that pays money to the examples, and ambigu- ous examples of service offerings
FinTech start-up, the partner’s currency is none. and revised the codebook where necessary. Based on this
& Business cooperation – The business cooperation common and codified understanding, the classification of
dimension indicates if a FinTech start-up operates on the remaining cases was mainly performed by a single
its own or if it collaborates with partners such as author. In an ex-post quality check, a random 5% sample of
traditional financial service providers (Bharadwaj et our total set of start-ups was individually coded by each of
al. 2013; Iansiti and Levien 2004; Lusch and the three authors and the results were compared. An inter-
Nambisan 2013; Moore 1996). Stand-alone service coder reliability of 87.3% as percent agreement or 73.3% as
offerings of FinTech start-ups do not maintain a Fleiss’ (1971) kappa equally weighted among all dimensions
business cooperation, whereas the co-creation of suggests adequate data quality. Landis and Koch (1977)
value as one actor among interdependent other actors denote a Fleiss’ (1971) kappa between 61% and 80% as
in a business cooperation that sometimes even crosses Bsubstantial^ strength of agreement among all coders. Thus,
traditional industry boundaries is described as we proceed with the analysis based on the cod- ing. Table 3
ecosystem. shows the relative frequency of all characteristics. Referring
to the relative frequencies of non-functional characteristics
among real-life examples shown in Table 3, we had to deal
with publicly unavailable information that resulted in
Application of the taxonomy missing values (14% missing for Buser’s currency,^ 15% for
Bpartner’s currency,^ 19% for Bpayment schedule,^ and 1
Classification of real-life examples missing value (1%) in each of the dimensions Binformation
exchange,^ Buser network,^ Bdata source,^ and Btime
To demonstrate the applicability and usefulness of our horizon of data^). Due to these missing values, which we do
taxonomy, we classified the service offerings of all 227 not consider for further interpretation, fractions of the
consumer- oriented FinTech start-ups that we used to characteristics in the affected dimensions can be even higher
than observed.
When analyzing the statistics from Table 3, some notable

observations can be made: Over one third (39%) of all investi- dimensions. With the application of cluster analysis below,
gated FinTech start-ups personalize their service offerings to we take an aggregated perspective on the non-functional
serve their users individually. In line with Amazon’s CEO Jeff characteristics included in our taxonomy and infer high-
Bezos’ aim to build an individual online shop for each level insights.
customer (Walker 1998), those FinTech start-ups strive for
individual customer experience. Further, it is noteworthy that
76% of all considered service offerings were technology- Clusters of FinTech start-up service offerings
generated; that is, no human employee is directly involved in
service delivery of more than three quarters of all investigated Methodological considerations
FinTech start-ups. As for channel strategy, almost all (99%)
FinTech start-ups exclusively use digital channels. An example To identify archetypes among the collected real-life examples
for a FinTech start-up that also uses non-digital channels is of FinTech start-up service offerings, we applied cluster
MK Payment Solutions. You can redeem their prepaid analysis. Cluster analysis is a statistical technique to group
vouchers purchased in a physical shop during offline similar objects based on their characteristics (Field 2013; Hair
shopping without needing to redeem them online. However, et al. 2010). The aim of this technique is to achieve high
the offline channel is just a supplement to online re- demption. homogeneity within each cluster and high heterogeneity
Despite the availability of big data, smart data, and advanced among objects of different clusters (Bacher et al. 2010;
analytics, we were surprised that less than one third of all Backhaus et al. 2011; Cormack 1971). We chose Ward’s
analyzed FinTech start-ups apply basic (21%) or advanced (1963) algorithm, which is an agglomerative hierarchical
(9%) analytics. While all FinTech start-ups use current data, clustering approach often used in practical applications
only 8% use predictive data. Finally, it is not surprising that (Backhaus et al. 2011; Ferreira and Hitchcock 2009; Fraley
the majority (93%) of FinTech start-ups process user data, and Raftery 2002; Milligan 1980; Milligan and Cooper
but it is meaningful that they process mostly structured data 1988; Saraçli et al. 2013). Whereas partitioning clustering
(97%), with unstructured data representing only 3% of all algorithms start with a given number of clusters and proceed
cases. In almost half (43%) of all cases, the user pays for the by mapping all objects to clusters until a given function
service with money. Nevertheless, in one third (33%) of all reaches its optimum, hierarchical clustering algorithms
cases, FinTech start-ups monetize their service offerings generate solutions for all possible numbers of clusters by
through third-party companies instead of or additional to subsequently merging (agglomerative type) or dividing
forcing users to pay for the service. (divisive type) clusters (Backhaus et al. 2011).
In sum, the service offerings of today’s FinTech start-ups Among the distance measures suitable for binary
have very diverse configuration across our taxonomy’s 15 variables, we selected the matching coefficient (Sokal and
Michener
Table 3 Relative frequencies of the non-functional characteristics among the service offerings of 227 consumer-oriented FinTech start-ups
Perspective Dimension Characteristics

Personalization not personalized (61%) personalized (39%)
Information exchange pull (99%) push (22%)
Interaction type direct (28%) intermediary (54%) marketplace (18%)
Interaction User network isolated (78%) interconnected (21%)
Role of IT technology-mediated (24%) technology-generated (76%)
Hybridization service-only (89%) with physical product (11%)
Channel strategy digital exclusive (99%) digital non-exclusive (1%)
Data source user (93%) peer (26%) public (51%)
Time horizon historic (64%) current (100%) predictive (8%)
Data transactional basic analytical advanced
Data usage (87%) (21%) analytical (9%)
Data type structured (97%) unstructured (3%)
Payment schedule none (11%) transactional (44%) subscription (29%)
User’s currency attention (35%) data (8%) money (43%)
Monetization
Partner’s currency none (52%) money (33%)
Business cooperation stand-alone (85%) ecosystem (15%)
Cumulated relative frequencies can be different from 100% if a dimension is non-exclusive or in case of missing data
1958) rather than more complex measures like the

contingency tables, we derive p-values via Monte Carlo
Russel/Rao index (Rao 1948) or the Jaccard coefficient (P. simulation (Hope 1968). When the test indicates
H. A. Sneath 1957) as it is the most straightforward stochastic dependence between two perspectives (p-value
approach, fits the sub- stantive interpretation of our data, is
≤0.1), the mapping of a FinTech start-up service offering
commonly used in combination with Ward’s method and to an archetype in one perspective relates to an archetype
has shown to perform similar to other measures of in another perspective. Hence, there are typical
distance or similarity (Finch 2005; Hands and Everitt combinations of archetypes. When the test indicates
1987). To apply the distance measure, we dichotomized stochastic independence between two perspectives, there
our classification that each characteristic of a dimension is are no statistically significant relationships between the
represented by a separate column that indicates 1 if the archetypes in both perspectives.
characteristic is observable at the respective service
offering and 0 if not. Subsequently, we standardized all Cluster solution and interpretation
dimensions in a way that the distance between two service
offerings lays between 0 and 1 for each dimension. We The results of the cluster analysis are three archetypes in the
follow methodological guidelines like, for example, Finch interaction perspective, three in the monetization perspective,
(2005) who performed a simulation study and tested the and two in the data perspective. For the cluster solution of the
application of Ward’s algorithms in combination with interaction perspective, goodness-of-fit measures state a total
different distance measures, thereunder the matching sum-of-squares of 682.0 (error sum-of-square of 369.4 and R2
coefficient, on dichotomous data. Finch (2005, p. 97) of 0.46). For the data perspective the total sum-of-squares is
asserts with respect to the combination of dichotomous 118.3 (error sum-of-squares of 93.9 and R2 of 0.21) and for the
data, matching coefficient, and Ward’s method that B[...] monetization perspective the total sum-of squares is 405.4
results would support the notion that cluster analysis of (error sum-of-squares of 139.4 and R2 of 0.66). According to
dichotomous data using these approaches is appropriate, these goodness-of-fit measures, the archetypes of the data
and can be expected to work reason- ably well.^ perspective have the lowest R2 and are therefore less
Despite tremendous research in the fields of cluster significant compared to the higher R2 of the interaction and
validation and measures for determining the suitable number of monetization archetypes. For each archetype, Table 4 states
clusters, there are no clear recommendations for one best absolute and relative frequencies of the characteristics among
suitable measure (Wu 2012). For instance, Backhaus et al. 227 real-life examples.
(2011), Milligan and Cooper (1985), and Sneath and Sokal The interaction perspective comprises three archetypes:
(1973) describe the deci- sion between different cluster Bpersonalized isolated,^ Bnon-personalized isolated,^ and
solutions (i.e., number of clusters) as a trade-off between the Bsocially connecting intermediate.^ All archetypes contain
manageability of the cluster solution and homogeneity within FinTech start-ups mainly featuring pull-based information ex-
each cluster. To determine a suitable number of clusters, we change. In particular, personalized user interaction (100%) and
considered 13 different measures as listed in the Appendix a not interconnected user base (91.4%) predominantly describe
(Tables 6 and 7). According to these measures, the number of the personalized isolated archetype. In comparison, the non-
clusters ranges from 1 to 14. As no clear number of clusters is personalized isolated archetype mainly differs by very rare per-
perceptible, we grouped all dimensions according to the sonalization (3.4%). The socially connecting intermediate inter-
perspectives interaction, data, or monetization and repeated the action archetype is characterized by an interconnected user
cluster analysis for each perspective separately. To ensure network (94.7%) and push-based information exchange
manageability, we limited the number of clusters to the (55.3%).
number of dimensions for each perspective and considered the The data perspective comprises two archetypes: Bstandard
interpret- ability of the suggested cluster solutions when processing^ and Badvanced analytics.^ Both archetypes
deciding the number of clusters. We used a three-cluster mainly use structured data from users, but only 5.6% to
solution for interaction and monetization and the two-cluster 27.3% use peer data and around 50% to 60% publicly
solution for data. Table 4 presents the archetypes as cluster available data. The standard processing archetype contains
solutions for each perspective as well as the absolute and most FinTech start-ups from our sample. They typically use
relative frequency of characteristics in each archetype. current data (99.5%) in a transactional way (93.8%) together
Finally, we created contingency tables (Table 5) across with basic analytical functions (23.0%). With a size of 18
the perspective-specific archetypes, in which we used start-ups, the advanced analytics archetype encompasses
Pearson’s chi-squared test of independence to examine FinTech start-ups whose service offerings include advanced
dependencies among all possible combinations of the three analytical data processing (100.0%).
perspectives (Agresti 2007). Partially considering The monetization perspective comprises three
comparatively small cluster sizes with only 18 or 38 archetypes: Bno money,^ Buser-paid,^ and Bbusiness-
observations (e.g., the advanced analytics data paid.^ It suffers from some missing values due to little
archetype), we use a significance level of 0.1. For precision available pricing information for some FinTech start-up
of the tests and given the cell sizes of the services. However, the no money archetype typically
involves no paying business partner, and users only pay
with their attention and loyalty or their data but
Table 4 Archetypes of 227 real-life consumer-oriented FinTech start-up service offerings

Interaction
Archetype Dimension Characteristics
Personalization not personalized [0] (0.0%) personalized [70] (100.0%)
Information exchange pull [68] (97.1%) push [19] (27.1%)
Interaction type direct [33] (47.1%) intermediary [31] (44.3%) marketplace [6] (8.6%)
Personalized
User network isolated [64] (91.4%) interconnected [5] (7.1%)
isolated
(n=70) Role of IT technology-mediated [12] (17.1%) technology-generated [58] (82.9%)
Hybridization service-only [68] (97.1%) with physical product [2] (2.9%)
Channel strategy digital exclusive [70] (100.0%) digital non-exclusive [0] (0.0%)
Non- Interaction type direct [27] (22.7%) intermediary [57] (47.9%) marketplace [35] (29.4%)
personalized User network isolated [112] (94.1%) interconnected [7] (5.9%)
isolated Role of IT technology-mediated [29] (24.4%) technology-generated [90] (75.6%)
(n=119) Hybridization service-only [101] (84.9%) with physical product [18] (15.1%)
Socially Interaction type direct [3] (7.9%) intermediary [35] (92.1%) marketplace [0] (0.0%)
connecting User network isolated [2] (5.3%) interconnected [36] (94.7%)
intermediate
(n=38) Role of IT technology-mediated [13] (34.2%) technology-generated [25] (65.8%)
Hybridization service-only [33] (86.8%) with physical product [5] (13.2%)
Data
Data source user [202] (96.7%) peer [57] (27.3%) public [104] (49.8%)
Standard Time horizon historic [130] (62.2%) current [208] (99.5%) predictive [14] (6.7%)
processing transactional basic analytical advanced analytical
Data usage
(n=209) [196] (93.8%) [48] (23.0%) [3] (1.4%)
Data type structured [209] (100.0%) unstructured [24] (11.5%)
Data source user [10] (55.6%) peer [1] (5.6%) public [11] (61.1%)
Advanced Time horizon historic [15] (83.3%) current [18] (100.0%) predictive [4] (22.2%)
analytics transactional basic analytical advanced analytical
Data usage
(n=18) [2] (11.1%) [0] (0.0%) [18] (100.0%)
Data type structured [18] (100.0%) unstructured [3] (16.7%)
Monetization
Payment schedule none [24] (51.1%) transactional [0] (0.0%) subscription [0] (0.0%)
No money User’s currency attention [18] (38.3%) data [6] (12.8%) money [0] (0.0%)
(n=47) Partner’s currency none [24] (51.1%) money [0] (0.0%)
Business cooperation stand-alone [47] (100.0%) ecosystem [0] (0.0%)
User-paid User’s currency attention [0] (0.0%) data [0] (0.0%) money [98] (100.0%)
(n=98) Partner’s currency none [93] (94.9%) money [3] (3.1%)
Business- User’s currency attention [62] (75.6%) data [13] (15.9%) money [0] (0.0%)
paid
Partner’s currency none [1] (1.2%) money [71] (86.6%)
(n=82)
[…] = Absolute frequency; (…) = Relative frequency; Cumulated relative frequencies can be different from 100% if a dimension is non-exclusive
or in case of missing data
Table 5 Contingency tables and Pearson’s chi-squared test of independence among the archetypes of all three perspectives (n = 227 for each
sub-table) Contingency table for perspectives data and interaction
Interaction Pearson’s chi-squared

Personalized isolated Non-personalized isolated Socially test of independence
connecting
intermediate
Data Standard processing 61 110 38 χ2 = 5.623
Advanced analytics 9 9 0 p-value = 0.053
Contingency table for perspectives monetization and interaction

Interaction Pearson’s chi-squared
Personalized isolated Non-personalized isolated Socially connecting intermediate test of independence
Monetization No money 17 17 13 χ2 = 8.781
User-paid 27 55 16 p-value = 0.058
Business-paid 26 47 9
Contingency table for perspectives data and monetization

Monetization Pearson’s chi-squared
No money User-paid Business-paid test of independence
Data Standard processing 42 89 78 χ2 = 1.730
Advanced analytics 5 9 4 p-value = 0.451
not (yet) with real money. FinTech start-ups of this The test results further suggest dependence between the ar-
archetype offer their service stand-alone (100.0%); that is, chetypes of the monetization and interaction perspectives (p-
they are not organized in a business ecosystem. The user- value 0.058). The socially connecting intermediate interaction
paid archetype involves no paying business partner archetype occurs comparatively less with the business-paid
(94.9%), but the user pays with money for the service monetization archetype (23.7% compared with 37.1% and
delivery (100.0%), either in a transactional way or within a 39.5%, respectively, for personalized and non-personalized
subscription. Further, only a limited number of FinTech isolated interaction archetypes).
start-ups of this archetype are organized in a business Archetypes of the data and monetization perspectives seem
ecosystem (10.2%). FinTech start-ups of the business-paid to be independent (p-value 0.451). This means that the
archetype are sometimes organized in a business observed archetype of a FinTech start-up service offering in the
ecosystem (28.0%) but are mostly stand-alone (72.0%). It data perspective is independent from that in the monetization
involves a paying business partner (86.6%) and demands perspective. The advanced analytics data archetype contains
attention (75.6%) or data (15.9%) from users only. only a few observations overall, but the distribution across
In conclusion, the archetypes of the interaction monetization archetypes follows the same pattern as for the
perspective mainly distinguish FinTech start-up service standard processing data archetype. Summarized, typical
offerings by the degree of personalization and combinations of archetypes among the three perspectives
interconnectedness of the user network. Summarizing the interaction, data, and monetization exist, however, not between
archetypes of the data perspective, FinTech start-up service every pair.
offerings mainly differ by the use of sophisticated data
analytics methods that are currently observed only to a
small extent. Interpreting the archetypes of the Discussion
monetization perspective, FinTech start-up service offer-
ings can mainly be distinguished by the role (none, user, or Our study contributes to the descriptive knowledge on the
business partner) that pays for the service delivery. FinTech phenomenon, as it explores a not yet well-understood
Table 5 shows contingency tables among the arche- domain. Our main contribution is a theoretically well-founded
types of all pairs of perspectives. The chi-squared test and empirically validated taxonomy that focuses on the non-
of independence indicates that archetypes of the data functional characteristics of consumer-oriented FinTech start-
and interaction perspectives depend on each other an- up service offerings. The comprehensive view of our
other (p-value 0.053). The socially connecting interme- taxonomy complements existing functionally oriented FinTech
diate interaction archetype is not observed with the ad- classifica- tions. Although functional classifications help
vanced analytics data archetype, although this setting distinguish FinTech start-ups based on what they do for
occurs for the personalized and non-personalized isolat- customers, they abstract from the mechanics underlying
ed interaction archetypes (12.9% and 7.6% of the obser- FinTech start-up service offerings and from how service
vations, respectively). offerings can be configured. Our
taxonomy is the first to take a non-functional perspective. the roles of users and customers diverge as alternative
From a theoretical point of view, our taxonomy serves as ways of monetization emerge (i.e., a business-paid
foundation for the analysis, design, and configuration of monetization scheme where the user’s data is monetized).
FinTech start-up service offerings, the analysis of antecedents
of FinTech success, and the adoption of service offerings.
Further, archetypes in each of the three perspectives Conclusion and further research
interaction, data, and monetization represent reoccurring
patterns in the variety of service offerings. Those archetypes Against the increasing importance of FinTech start-ups for
can be used as a starting point to understand higher-order the financial sector, we investigated non-functional
configurations of FinTech start-up service offerings and to characteristics of consumer-oriented FinTech start-up
anticipate comparable trends in other consumer-oriented service offerings. To do so, we developed a taxonomy,
industries. following an established taxonomy development process.
As with every research project, our study is beset with limi- Contributing to the descriptive knowledge on FinTech
tations. First, our sample of FinTech start-ups is not start-ups, our taxonomy characterizes FinTech start-up
exhaustive, as there are over 12,000 FinTech companies service offerings based on 15 dimensions structured along
worldwide offering traditional and new services (Dietz et al. the perspectives interaction, data, and monetization. By
2015). We tried to address this issue by referring to different applying our taxonomy to 227 real-world examples, we
FinTech reports and drawing a random sample from the demonstrated that it helps analyze and understand
extensive start-up database CrunchBase. Second, our samples FinTech start-up service offerings. For each perspective,
sample only includes extant FinTech start-ups, but the start-up we also identified archetypes, i.e., typical combinations of
landscape is highly dynamic. Emerging types of FinTech characteristics across all included dimensions.
services may be underrepresented in the current sample. For Our results also motivate future research. First,
example, we assume that business ecosystems and the use of researchers should further explore the configuration of
advanced data analytics will be observed more often in the FinTech start-up service offerings. Second, the
future. Therefore, we developed our taxonomy to be revisable relationships between different configurations and the
and extendible by new perspectives, characteristics, and success of FinTech start-ups should be examined. Third,
dimensions, as suggested by Nickerson et al. (2013). Third, researchers should investigate the service offerings of B2B
our taxonomy only considers consumer-oriented FinTech start- FinTech start-ups as we only focused on consumer-oriented
ups. To understand the FinTech phenomenon at large, B2B start-ups. Our taxonomy could serve as a starting point as
FinTech start-ups and FinTech services offered by incumbents we expect similar dimensions in the data and interaction
should be considered as well. perspectives, while anticipating modifications in the
Despite these limitations, our study entails a range of monetization perspective. We hypothesize that the data-
man- agerial implications. First, our taxonomy provides oriented archetypes can also be observed in the B2B
practitioners with a differentiated view on the segment. Although the interaction-related archetypes are
configuration of FinTech start-up service offerings beyond likely to have B2B equivalents as well, we think that the
a functional or technological perspective. Practitioners personalization dimension should be interpreted as
such as traditional financial service providers get a individualization for each business partner. We expect most
detailed understanding of the interaction among FinTech differences in the monetization perspective where the
start-ups and their customers, learn how FinTech start-ups split between users’ and business partners’ currency may
employ data analytics to enable innovative financial merge into a single dimension. We also suggest to re-
services, and get to know different ways of monetizing a interpret the Bbusiness cooperation^ dimension by
FinTech service. On this foundation, practitioners can differentiating ecosystems into an asymmetric and
analyze an individual FinTech start-up service offering, symmetric cooperation model. Asymmetric cooperation refers
design new service configurations, and compare existing to relationships with dedicated service provider and
competitive and non-competitive service offerings within requester roles, whereas symmetric cooperation relates to a
and across functional domains. As for our cluster anal- strong focus on value co-creation by two or more business
ysis, we identified archetypes that capture reoccurring partners. We encourage researchers to evaluate a sample of
configurations of service offerings. We identified FinTech start- ups from the B2B segment and test our
Bpersonalized isolated,^ Bnon-personalized isolated,^ hypotheses. As traditional financial institutions begin to
and Bsocially connecting intermediate^ as interaction- engage in partnerships with FinTech start-ups and derive
related archetypes, Bstandard processing^ and Badvanced best-practices for offering FinTech services on their own,
analytics^ within the data perspective, and Bno money,^ an investigation of the service offerings of traditional
Buser-paid,^ and Bbusiness-paid^ as monetization-related financial institutions can be interesting as well. Last not
archetypes. These archetypes provide practitioners with an least, we suggest reassessing the dimensions of our
aggregated view on FinTech start-up service offerings. taxonomy and clustering results after a certain amount of
Lastly, we addressed the consumer’s role in FinTech time, because this will provide valuable longitudinal in-
services when we showed that sights into the evolution of the FinTech phenomenon.
Appendix
FinTech start-up sample
Table 6 FinTech start-up sample with name, website URL, and source for each start-up
ID FinTech start-up Source
Name Website Bajorat (2015) CrunchBase (2016) Sharf (2015) Toby and Pollari
(2015)
1 Achieve Lending achievelending.com x
2 Acorns acorns.com x x x
3 Affirm affirm.com x x x
4 appsichern appsichern.de x
5 Arthena arthena.com x
6 Atom Bank atombank.co.uk x x
7 auxmoney auxmoney.com x
8 Avant avant.com x x x
9 avuba avuba.de x
10 ayondo ayondo.com x x
11 Azimo azimo.com x x
12 BankingCheck bankingcheck.de x
13 Bankless24 bankless24.de x
14 barpay ezv-gmbh.de/produkte.html x
15 Barzahlen barzahlen.de x
16 BATS Global Markets batstrading.com x
17 Bergfürst de.bergfuerst.com x
18 Betterment betterment.com x x
19 bettervest bettervest.de x
20 Billpay billpay.de x
21 bitbit bitbit.cash x
22 Bitbond bitbond.com x
23 bitcoin.de bitcoin.de x
24 Bitt bitt.com x
25 Börsenampel boersenampel.com x
26 Bridg bridgtheapp.com x
27 buybitcoin buybitcoin.ph x
28 Call Levels call-levels.com x
29 cashboard cashboard.de x
30 cashcloud cashcloud.com x
31 Centralway Numbrs centralway.com x
32 Circle circle.com x
33 Circleup circleup.com x x
34 Coinbase coinbase.com x
35 CoinJar coinjar.com x
36 colleqt colleqt.com x
37 communitylife communitylife.de x
38 companisto companisto.com x
39 Coverfox Insurance coverfox.com x x
40 Credit Karma creditkarma.com x x x
41 CreditMantri creditmantri.com x
42 Cringle cringle.net x
43 crowdhouse crowdhouse.ch x
44 cybits cybits.de x
45 damantis damantis.com x
46 dban mydban.de x
47 Digit digit.co x
48 Doctor Wealth drwealth.com x
49 Earnest earnest.com x
50 easyfolio easyfolio.de x
51 elefunds elefunds.de x
52 elopay elopay.com x
53 Equitise equitise.com x
54 EstateGuru estateguru.eu x
55 Estimize estimize.com x x
Table 6 (continued)
(2015)
56 eToro etoro.com x x
57 fairr fairr.de x
58 feelix myfeelix.de x
59 Fentury fentury.com x
60 Ferratum ferratumgroup.com x
61 Fidor Bank fidor.de x
62 FinanceFox financefox.de x
63 Financelt financeit.io x
64 finanzcheck finanzcheck.de x
65 finanzen.de finanzen.de x
66 Finmar finmar.com x
67 flatex flatex.de x
68 FormFree formfree.com x
69 Friendsurance friendsurance.de x x
70 Funding Circle fundingcircle.com x
71 Fundrise fundrise.com x x
72 getsafe getsafe.de x
73 ginmon ginmon.de x
74 go4q go4q.mobi x
75 goHenry gohenry.co.uk x
76 Goji goji.com x
77 greenXmoney greenxmoney.de x
78 helping cents helpingcents.info x
79 HiFX hifx.co.uk x
80 HITbills hitbills.com x
81 HolyTransaction holytransaction.com x
82 IDnow idnow.de x
83 idvos identitiy.tm x
84 Income& incomeand.com x
85 Innovative Student Loan Solutions isloansolutions.com x
86 Instavest goinstavest.com x
87 Investing.com investing.com x
88 iPayst ipayst.com x
89 itBit itbit.com x
90 Itemize Corp. itemize.com x
91 iZettle izettle.com x
92 justETF justetf.com x
93 Justspent justspent.com x
94 Kapitall kapitall.com x
95 Kard getkard.com x
96 Kesh kesh.de x
97 kittysplit kittysplit.com x
98 Klarna klarna.com x
99 klimpr klimpr.com x
100 Klinche klinche.com x
101 Knip knip.ch x x x
102 Kontoalarm kontoalarm.de x
103 Kontopilot (AppStore only) x
104 Laterpay laterpay.net x
105 LearnVest learnvest.com x x
106 lendico lendico.de x
107 Lending Club lendingclub.com x x
108 LendInvest lendinvest.com x
109 LendKey Technologies lendkey.com x
110 Lendstar lendstar.io x
111 Level Money levelmoney.com x x
112 liveident liveident.com x
113 Loanbase loanbase.com x
114 m8 (AppStore only) x
115 mamooble mamooble.com x
116 minnits minnits.de x
117 MK Payment Solutions mkpayment.com x
118 ModernLend modernlend.com x
Table 6 (continued)
Name Website Bajorat (2015) CrunchBase (2016) Sharf (2015) Toby and Pollari (2015)
119 Money.net money.net x

120 moneygarden moneygarden.de x
121 Moneymeets moneymeets.com x
122 Motif Investing motifinvesting.com x x
123 myiban myiban.de x
124 MyMicroInvest mymicroinvest.com x
125 N26 n26.com x x x
126 Nelnet nelnet.com x
127 Neyber neyber.co.uk x
128 Nutmeg nutmeg.com x
129 onlineversicherung.de onlineversicherung.de x
130 opentabs opentabs.de x
131 OptionsHouse optionshouse.com x
132 organize.me organize.me x
133 Oscar hioscar.com x
134 Osper osper.com x x
135 owlhub. owlhub.co x
136 paij paij.com x
137 passt24 passt24.de x
138 Patientco patientco.com x
139 paycash paycash.eu x
140 payfriendz payfriendz.com x
141 paylax paylax.de x
142 Payoff payoff.com x
143 payorshare payorshare.de x
144 PayRange payrange.com x
145 paywithatweet paywithatweet.com x
146 payza payza.com x
147 Personal Capital personalcapital.com x x x
148 Piggipo piggipo.com x
149 PolicyBazaar policybazaar.com x x
150 Pom letspom.be x
151 prepaidbitcoin.ph prepaidbitcoin.ph x
152 PrimaHealth Credit primahealthcredit.com x
153 Propel joinpropel.com x
154 Property Partner propertypartner.co x
155 Prosper prosper.com x x x
156 qnips qnips.com x
157 Qontis qontis.ch x
158 qooqo qooqo.com x
159 quandoo quandoo.de x
160 Quirion quirion.de x
161 Qvivr swypcard.com x
162 RateElert rateelert.com x
163 ratepay ratepay.com x
164 Razorpay razorpay.com x
165 rebit rebit.ph x
166 Remitly remitly.com x
167 Rent My Items rentmyitems.com x
168 Revolut revolut.com x
169 Robinhood robinhood.com x x
170 RupeeTimes rupeetimes.com x
171 SatoshiPay satoshipay.io x
172 Savedo savedo.de x x
173 schutzklick schutzklick.de x
174 seedmatch seedmatch.de x
175 Self Lender selflender.com x
176 ShapeShift shapeshift.io x
177 sharewise sharewise.com x
178 Simple simple.com x
179 Simply Wall St simplywall.st x
180 smartdepot smartdepot.de x
181 smava smava.de x
Table 6 (continued)
(2015)
182 SocietyOne societyone.com.au x x
183 Sofi sofi.com x
184 Splittable splittable.co x
185 SprinkleBit sprinklebit.com x
186 Squirrel squirrel.me x
187 sqwallet sqwallet.de x
188 Stockpile stockpile.com x
189 Stockspot stockspot.com.au x
190 StockTouch stocktouch.com x
191 Swanest swanest.com x
192 tabbt tabbt.com x
193 tipranks tipranks.com x
194 Traity traity.com x
195 TransferWise transferwise.com x x x
196 treefin treefin.com x
197 truewealth truewealth.ch x
198 Tullius Walden tullius-walden.com x
199 Twindepot twindepot.de x
200 twingle twingle.de x
201 United Signals united-signals.com x
202 vaamo vaamo.de x
203 Vaamo Finanz AG blog.vaamo.de x
204 Valuation App valuationapp.info x
205 vaulted vaulted.com x
206 Vertragium vertragium.de x
207 vexcash vexcash.com x
208 vitrade vitrade.de x
209 voola voola.de x
210 Vouch vouch.com x
211 Wealthfront wealthfront.com x x x
212 webid webid-solutions.de x
213 WeLend welend.hk x
214 weltsparen weltsparen.de x
215 wikifolio.com wikifolio.com x
216 WiseBanyan wisebanyan.com x
217 Worldremit worldremit.com x
218 Xapo xapo.com x
219 xpresscredit xpresscredit.de x
220 Yacuna yacuna.com x
221 yapital yapital.com x
222 Yoyo Wallet yoyowallet.com x
223 ZahlZ.app zahlz.com x
224 Zencap zencap.de x
225 Zinsland zinsland.de x
226 zinspilot zinspilot.de x
227 Zopa zopa.com x
Measures to decide on cluster solution
Table 7 Suggested number of clusters of 227 real-life examples of

FinTech start-up service offerings (without split into the interaction,
data, and monetization perspectives)
Measure suggested by Suggested

number of
clusters
Ball and Hall (1965) 3
Caliński and Harabasz (1974) 3
Davies and Bouldin (1979) 14
Dunn (1974) 8
Frey and Van Groenewoud (1972) 1
Halkidi et al. (2000) 11
Hartigan (1975) 3
Hubert and Levin (1976) 14
Krzanowski and Lai (1988) 14
McClain and Rao (1975) 2
Milligan (1980, 1981) 8
Rousseeuw (1987) 12
Tibshirani et al. (2001) 2
Backhaus, K., Erichson, B., Plinke, W., & Weiber, R. (2011).

Open Access This article is distributed under the terms of the Multivariate Analysemethoden: Eine anwendungsorientierte
Creative Commons Attribution 4 .0 International License Einführung (13th ed.). Berlin/Heidelberg: Springer.
(http:// creativecommons.org/licenses/by/4.0/), which permits
unrestricted use, distribution, and reproduction in any medium,
provided you give appropriate credit to the original author(s) and the
source, provide a link to the Creative Commons license, and indicate
if changes were made.
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Digital Marketplace and FinTech to Support Agriculture

Sustainability
Muhammad Anshari*, Mohammad Nabil Almunawar, Masairol Masri, Mahani Hamdan
Universiti Brunei Darussalam, School of Business & Economics, Jln Tungku Link Gadong, Bandar Seri Begawan, Brunei Darussalam
Abstract
Agriculture plays an important in providing food security and sustainability for the people in any country. However, lack of
funding and limited distribution channels to reach customers are frequent problems faced by farmers to meet the level of
sustainability. Agriculture’s sustainability can be strengthened by allowing an innovation of services such as Financial
Technology (FinTech), and digital marketplace. Digital marketplace with Fintech enabled might transform agriculture’s business
process into more sustainable in term of funding and distribution. FinTech offers farmers convenient ways of getting sources of
funding through crowdfunding and digital payment system. Thus, digital marketplace can act as a platform for FinTech to
integrate the innovative financial solution into broader agriculture’s ecosystem. The study proposes a modelling digital
marketplace with FinTech enabled especially crowdfunding and payment system in order to support agriculture’s sustainability.
The model connects all actors (farmers, landowners, investors, and consumers) into a platform that can promote transparency,
empowerment, resourcefulness, and public engagement in agriculture.
© 2019 The Authors. Published by Elsevier Ltd.
This is an open access article under the CC BY-NC-ND license (https://creativecommons.org/licenses/by-nc-nd/4.0/)
Selection and peer-review under responsibility of the 2018 5th International Conference on Power and Energy Systems Engineering,
CPESE 2018, 19–21 September 2018, Nagoya, Japan.
Keywords: Digital Marketplace; Financial Technology (FinTech); Agriculture; Sustainability; Crowdfunding, AgroPay
* Corresponding author. Tel.: +6737162092.

E-mail address: [email protected]
1876-6102 © 2019 The Authors. Published by Elsevier Ltd.

This is an open access article under the CC BY-NC-ND license (https://creativecommons.org/licenses/by-nc-nd/4.0/)
Selection and peer-review under responsibility of the 2018 5th International Conference on Power and Energy Systems Engineering,
CPESE 2018, 19–21 September 2018, Nagoya, Japan.
10.1016/j.egypro.2018.11.134
Muhammad Anshari et al. / Energy Procedia 156 (2019) 234–238 235
1. Introduction
The emergence of Financial Technology (FinTech) and digital marketplace gained wide attention from industry,
research, public or private organization. FinTech is an important concept and application that trigger researches in
any sectors including farming and agriculture. As digital marketplace enables new forms of communication and
transactions between actors within agriculture’s business process (consumers, suppliers, farmers, investors,
distributors, etc.), smart connectivity is an essential part for sustainability and productivity. Agriculture is associated
with agricultural economics and management studies to explore development of food economies and sustainability
[1]. In traditional business process, farmers especially in developing countries suffer some problems of funding
deficiencies, capital issues, limited access to financial institutions, and lacking access to the market. There are also
many layers involved in agriculture’s supply chains from farmers to consumers creating additional cost for product.
Digital marketplace has changed many business processes almost in any sector [2]. Introducing digital marketplace
with FinTech enabled could advance e-agriculture that has become the action plans in declaration of the World
Summit on the Information Society (WSIS) where The Food and Agriculture Organization (FAO) has the
responsibility of implementing e-agriculture [3]. Digital marketplace in agriculture is needed to support market
demand for quality of agricultural products with a cheaper price from diverse geographical locations.
Digital marketplace will accelerate changes in demand, leading to a growing interest in foods from diverse
geographical locations [4]. Therefore, accommodating FinTech in digital marketplace could overcome frequent
problems of financial issues faced by farmers and encourage public to invest into agriculture [5]. Digital marketplace
as a platform will empower with the massive information instantly that they can reach out to almost everything
through the Internet using their smartphone to find any information that they need or going further by making online
transactions anywhere and anytime [6]. The study proposes a model of digital marketplace with FinTech enabled in
agricultural setting. Digital marketplace will act as system intermediaries that can be accessed by all the actors
involved based on their respective roles. The main role of digital marketplace is to link producers and consumers so
that goods or services can flow from producers to consumers directly with less intermediaries. Similarly, digital
marketplace in agriculture involves e-commerce transaction linking producers or farmers to customers and
wholesalers. It may include managing the flow of transactions and distribution for business-to-business (B2B),
business to consumers (B2C) and consumer-to-consumer (C2C). Then, any financial transaction occurred within
digital marketplace are supported by its FinTech.
2. Literature Review
There are several actors in agriculture business linking the first line processors, wholesalers, manufactures, retailers,
manufacturers, and finally customers. Figure 1 shows the most common actors involved in agribusiness’s supply
chain. The first line processors refers to all actors involved in processing raw agro products, i.e., farmers,
landowners, and investors. In case of small medium agro enterprises, first line processors sell directly to customers.
However, the most common type of digital marketplace in the agro product sector is business to business (B2B) [7].
Sometimes, farmers own land and invest at the same time. However, there are condition where farmers do have land
but do not have enough funding. Farmers receive funding from investors or bank to buy seeds, fertilizers, and any
supporting tools. In another conditions, farmers rent a land from landowners and lend venture capital from investors.
Then, these actors are suppliers or distributors. Suppliers, distributors or business providers act as intermediaries that
can dominate supply chains activities by controlling the flow of goods as well as prices from first line processors to
customers, wholesalers, or retailers. These are many layers existed from the first line processors to customers that
each layer incurs additional cost. The existing model also portrays limited sources of funding and access to the
market for first line processors. While, Customers have less control over products’ option and pricing.
236 Muhammad Anshari et al. / Energy Procedia 156 (2019) 234–238
Fig. 1. Supply chains in Agribusiness. Source: Authors’ Compilation, 2018.
2.1. Digital Marketplace
There are problems of non-information-based business in agriculture so that the dependency on ICT to conduct
business operations is lesser than service industries. However, competition’s landscape has intensified with the free
trade zone that allows any goods, products and services to freely move with less restriction among the countries,
implying that ICT in agriculture will instill high impact on the future growth of agribusiness for sustainability,
competitiveness and the long-term survival. In addition, businesses has rely on advance supply-chain management
to support customers in making quick, effective, and efficient reservations. Customers search best available
agriculture products as well as making reservations use web/Apps. Web/Apps provides convenience, easy access, up
to date information, price comparisons, time saving. The emergence of digital marketplace for agriculture will no
longer be a choice for many business organizations rather it has become a competitive necessary for them to stay in
the market. Digital marketplace will drive innovation including in agribusiness by introducing a platform as
intermediaries which is a service provider that connects investors, landowners, farmers, and customers in a single
platform of mobile market. It offers customers to have direct access to the first line processors using their
smartphones. It will make customers to gain more bargaining power as they can compare prices, quality, delivery,
and services from multiple suppliers [8]. While, social media within the platform is a powerful tool to support
internal communication and knowledge sharing as well as the quick dissemination of information [9]. Furthermore,
social media can be used by service providers to learn people or customers’ behavior by extracting data from the
conversation that takes place in the social networks [10, 11].
2.2. Financial Technology (FinTech)
FinTech is the innovative use of technology to deliver financial services and products offering a user-friendly and
convenient ways of managing finance for its consumers in apposition with traditional methods. Additionally,
Fintech is also referred as the future of banking and finance that simply provide the technology to financial service
providers [12]. FinTech and its financial services can aid agriculture’s sector to compete in a global economy
through crowdfunding, mobile payments, money transfers, loans, fundraising, asset management, and
payments/billing. FinTech is considered innovative because it can be easily connect all the actors in the business line
into a single platform. For instance, crowdfunding in FinTech can connect first line processor (Figure 1) to the
public as investors and at the same time as customers for the products. It enables peer-to-peer investment where
individuals lend money to first line processors without using an official financial institution as an intermediary.
Furthermore, FinTech’s payment facilitates pay online with a virtual payment account.
3. Method
Some referred journal publications were used to find all sources for referencing mostly in English languages. The
methods employed of content analysis of the research on agriculture’s business process, digital marketplace and
FinTech published in peer-reviewed journals. Then, the results were clustered into a thematic of technical,
conceptual, and modelling of digital marketplace in agriculture. In our analysis, we examined the business process
Muhammad Anshari et al. / Energy Procedia 156 (2019) 234–238 237
of mobile commerce in agribusiness. Subsequently, we used the results of analyses to formulate model and
recommendations.
4. Discussion
Digital marketplace with FinTech enabled are driven with the massive adoption of smartphone so that many
business transactions including in agriculture are conducted through smartphones, including transactions in
investment, payment or buying online. Smartphones has become a front-end device of digital marketplace where
customers, suppliers, and investors engage in business transaction directly or indirectly and also be used as tools to
manage business remotely. Early business type in the agriculture is business to business (B2B), this is because the
market is fragmented, the supply chain is inefficient, buyers change sellers regularly and the value of the products is
usually volatile [13].
As smartphones are utilized for many business transactions, then business organizations, including agriculture
sectors embrace mobile technology developing mobile business platform. Figure 2 shows the model of digital
marketplace with the FinTech enabled namely AgroPay. Digital marketplace as a platform acts as business
intermediaries that connects to all actors. The platform can be based on Web or Apps that allows communications
and transactions among actors can be conducted using smartphones. Double arrow directions indicate that the flow
of data/information is reciprocal for connecting actors.
Fig. 2. Modelling Digital Marketplace with AgroPay as FinTech’s platform. Source: Authors’ Compilation, 2018
As comparison, in conventional business intermediaries, suppliers or business owners control the flow of goods
and products’ pricing from first line processor to their customers (Figure 1). However, digital marketplace as the
platform changes business process by removing the layers of business owners so that all actors may have direct
access for transaction and exchange of information [14]. For instance, customers can make transactions directly to
the farmers by picking up from their Apps and pay the farmers through their AgroPay account. While, farmers could
buy fertilizers from suppliers from the platform and also pay through AgroPay. B2B transaction in digital
marketplace has enabled business customers (i.e. Hypermart) to order directly from first line processor whenever
they need to get stock for agriculture freshly from the farm. Digital marketplace has changed the role of business
intermediaries by reducing the control of data flows from investors, farmers, and customers. At the same time,
introducing FinTech through AgroPay will make cashless transaction easy for all the actors. The platform provides
service for all parties forming a direct set of business line. Furthermore, the niche of the platform is mobile services
where all parties can participate in business activities at any time and from anywhere.
Fig.3 Crowdfunding interface at AgroPay

238 Muhammad Anshari et al. / Energy Procedia 156 (2019) 234–238
The other FinTech initiative in the platform is crowdfunding system (Figure 3). Crowdfunding will allow farmers to
easily get source of funding from the public. Crowdfunding allows farmers to expand their agribusiness by
providing everyone the ability to invest and track their investment of their agriculture product from their
smartphones. The first line processors might offer investors to choose their agriculture products from short-term
investment on short-cycle plants such as peanut or vegetables to long-term investment on fruit trees such avocado or
dates. Potential investors can be anyone that invests on agriculture products for specific timeframe from seeding to
harvesting depends on type of product.
Conclusion
Smartphone is a general-purpose device that can be used to access, process, present information as well as facilitate
business transactions. Digital marketplace with FinTech enabled can be a very useful platform for conducting
business transactions on agriculture as they can be done conveniently at anytime from anywhere. The platform can
be expected to attract all actors in agribusiness, conducting business transactions transparently and conveniently
with personalized services. AgroPay provides necessary functions for investors to conduct transactions efficiently
anytime-anywhere. Investors through crowdfunding can select from the wide-range agriculture products through
their smartphone to invest. In addition, customers are empowered to access directly on price and making comparison
on various agriculture products offered and pay directly using AgroPay as other FinTech initiative. This will cause
an increase price competition among agro products suppliers and improve sustainability of agriculture product
through FinTech.
References
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Geographies of Finance I: Exploring FinTech – Maps and Concepts
Dariusz Wójcik
University of Oxford, UK
Abstract
In the first of two reports on FinTech, I review definitions, roots and taxonomies of FinTech,
survey studies charting FinTech development, and theoretical approaches to FinTech.
Emerging empirical research shows a dynamic growth of FinTech characterized by
heterogeneity and diversity. Ecosystems, financial ecologies, and digital platform economies
are the most popular approaches to FinTech, and I argue that they can be used fruitfully in
combination with more established concepts, such as networks and agglomeration. Overall, I
show that FinTech research is in a state of flux concerning concepts and empirics, and
highlight the potential of geography to tame the beast.
Keywords
FinTech, financial technology, ecosystems, platform economy, financial geography
Acknowledgements
I am grateful for suggestions and comments from David Bassens, Noel Castree, Theodor
Cojoianu, Sabine Dörry, Dan Haberly, Alex Hughes, Stefanos Ioannou, Eric Knight, Karen
Lai, Paul Langley, Vladimír Pažitka, Michael Urban, Wei Wu, and Matt Zook.
Funding
The author has received funding from the European Research Council (ERC) under the
European Union’s Horizon 2020 research and innovation programme (grant agreement
number 681337). The article reflects only the authors’ views and the ERC is not responsible
for any use that may be made of the information it contains.
I Introduction
The news is full of stories about FinTech. A company indexing FinTech development claims
that “one fintech success story can do more to transform a local economy, or help an entire
nation re-define itself in the eyes of its citizens and trading partners, than any other industry”
(Findexable, 2019: 8). No other sector has more private companies valued above US$1bn
(CBInsights, 2020). The Governor of the Bank of England and countless commentators have
referred to a ‘FinTech revolution’, debating its promises and threats (Carney, 2017). As I am
writing this report in a locked down Britain, insiders promote FinTech as a champion of post-
pandemic recovery (Kehinde and Eksin, 2020).
I have chosen FinTech as the subject of the first two progress reports on financial geography
I was commissioned to write. In doing so, I hope to complement the work of my
predecessors, noting that since Leyshon’s reports in 1997 and 1998, which included
discussions on technology in finance, the word technology has only been mentioned once
(Christophers, 2014). Scholarship on FinTech is young and booming, with hundreds of
works, including numerous literature reviews (e.g. Millian et al., 2019; Sangwan et al., 2019;
Gai et al., 2018) and books (Blakstad and Allen, 2018; Gupta and Tham, 2018; Rubini,
2017). Business, economics, management, computer science and law are the main
disciplinary homes of this
1
emerging literature. With few exceptions (Goldstein et al., 2019), mainstream finance
journals have been slow at engaging with the topic, highlighting once again a gulf between
theories and practices of finance. Meanwhile, there is a small but vibrant body of research on
FinTech emerging in geography and social sciences.
In the first report, I start by reviewing definitions, roots and taxonomies of FinTech, studies
mapping it around the world, as well as theoretical approaches to conceptualizing FinTech.
The second report will survey research examining the impacts of FinTech on financial sector
and centres, regulation and stability, inclusion and governance. It should become apparent
that scholarship on FinTech is in a state of flux, and considerable uncertainty concerning
concepts and empirics, even before we get to the more obviously controversial questions
about its implications for economy and society. As I offer a tentative route through these
interdisciplinary exchanges, I suggest that these fluidities, uncertainties and controversies
reflect the significance of the FinTech phenomenon and highlight potential for geography and
geographers to be central to understanding it.
II Definitions, roots and taxonomies of FinTech
Arguably, finance has always been an early adopter and intensive user of technology, and the
combination of finance and technology an enabler of globalization (Arner et al., 2016; Milian
et al., 2019; Warf, 1989). It was only a matter of time when the two words would come
together. Some trace the contraction to a project run by Citigroup in the early 1990s (Arner et
al., 2016; Langley and Leyshon, 2020). Millian et al. (2019), however, find the first use of the
portmanteau in a 1972 article by the executive of Manufacturers Hanover Trust bank
(Bettinger, 1972). While in quotes I preserve whatever form is used by the author/s,
otherwise I use the form FinTech, as it appears most popular and highlights the combination
of fin and tech better than fintech or Fintech.
The Financial Stability Board defines FinTech as “technology-enabled innovation in financial

services” (Andresen, 2017: 1). Arner et al. (2016: 22) refer to FinTech as “the use of
technology to deliver financial solutions”. They distinguish three eras of FinTech
development. The era of analogue finance started with the transatlantic telegraph in the
1860s. The second, with the first computers, automated teller machines and electronic
payment systems emerging in the 1960s, started a gradual shift to digital finance. Arner et al.
(2016) see 2008 as the start of the current FinTech era, distinctive in terms of who is
providing financial services and the pace of innovation. While previously technology was
used by financial firms to help deliver services, now such services are also provided by start-
ups and established firms in the technology sector (see also Brummer and Yadav, 2018). In
the USA for example, 58% of FinTech patents come from outside of the financial services
industry (Chen et al., 2019). The catalysts for FinTech development since 2008 can be found
on both fin and tech sides. The financial crisis had shaken the financial sector, and tarnished
the reputation of banks, while the advent of smartphones and application programming
interfaces (APIs), which allow computer applications to talk to each other over a network,
opened new avenues for financial innovation. Bitcoin, the first application of blockchain (aka
distributed ledger technology), was also introduced in 2008 (Fernandez-Vazquez et al., 2019;
Lansiti and Lakhani, 2017). Low interest rates since 2008 have helped the FinTech
investment boom (Dermine, 2017).
Recognising the distinctiveness of the finance-technology nexus since around 2008 leads to
narrower definitions. Chen et al. (2019) define FinTech as “the set of recently developed
digital computing technologies that have been applied—or that will likely be applied in the
future—
to financial services” (2066). For Schueffel (2016) it is “a new financial industry that applies
technology to improve financial activities” (45). I propose to define FinTech as a set of
innovations and an economic sector that focus on the application of recently developed
digital technologies to financial services. What justifies the term sector is that there are
possibly over 10,000 firms globally (Langely and Leyshon, 2020) that identify themselves as
FinTechs, while FinTech innovations can also be led by public and non-profit organisations,
e.g. central bank digital currencies or charitable crowdfunding (Gomber et al., 2018).
Reference to innovations stresses that FinTech activities can be performed by organisations
whose main sectoral affiliation is elsewhere, e.g. in finance or technology. Emphasis on
recent means that electronic, digital and internet finance predate FinTech, even though the
recent innovations in these areas belong to it (Gomber et al., 2017). While such terms are
sometimes used interchangeably with FinTech, they understate the role of technology in the
fin and tech combination. The definition also acknowledges that many recent digital
technologies applied to finance can be applied elsewhere, e.g. blockchain in supply chain
management or artificial intelligence (AI) in transport.
To tame the beast, much research has offered FinTech taxonomies. Gomber et al. (2017)
suggest three taxonomic dimensions: functions, technologies, and institutions. FinTech
functions cover the whole spectrum of financial needs: payments, savings, borrowing, risk
management, and advisory (IMF, 2019; Gimpel et al., 2018; Buchanan and Cao, 2018). Key
technologies include: AI, big data, machine learning, blockchain (including cryptoassets and
cryptocurrencies), and Internet of Things (IoT) (Sangwan et al., 2019; Chen et al., 2019). Key
institutions are financial services firms, technology firms, and FinTech firms (Gomber et al.,
2017). Distinctions are also made between business-to-business, business-to-customer and
cusrtomer-to-customer FinTech (Wójcik and Cojoianu, 2018), as well as between intra- and
interorganisational applications (Puschmann, 2017). To date, two areas of FinTech that have
attracted most research are broadly defined crowdfunding (including peer-to-peer lending)
and blockchain (including cryptocurrencies) (Cai, 2018; Xu et al., 2019). Data is a challenge,
since financial technology does not exist as a category in official statistics. Ironically, ISIC -
the most influential international industrial classification - separated information technology
from financial and business services in 2008 (Wójcik, 2020). The relative novelty, broad
scope and hybrid nature make FinTech a fuzzy concept, but one really worth studying.
III Mapping FinTech around the world
At a global level, we can distinguish between FinTech in developed and developing markets.
While in developed markets new digital technologies arrived on the scene when the global
financial crisis disrupted the financial sector (releasing thousands of professionals and much
capital seeking new opportunities), in developing markets they arrived on the scene of
underdeveloped banking and finance (Arner et al., 2016). Borrowing from Langley and
Leyshon (2020), FinTech focuses on ‘transforming banking’ in the global North and ‘banking
the unbanked’ in the global South. Though detailed studies on the evolution of FinTech
innovations are hard to find, research suggests parallel roots centered on the USA and the UK
in developed, and Kenya in developing markets (Arner et al., 2016, Ndung’u, 2018). Whereas
in Africa the sector has focused on mobile money, in East and South Asia we see an
intertwining of African-style ‘bottom-of-the-pyramid’ retail FinTech and Western-style B2B
innovation (Arner et al., 2016). Middle East, Western and Central Asia, and Latin America
are considered late starters of FinTech (Bassens, 2020; IMF, 2019; Zalan and Toufaily,
2017). According to CCAF (2020) out of $305bn raised by FinTech (covering crowdfunding,
P2P lending and related capital raising) in 2018, 70% was in China, followed by the USA
($61bn),
UK ($10bn), and five more countries surpassing $1bn (the Netherlands, Indonesia, Germany,
Australia, and Japan). In per capita terms, the top five countries were: the USA, the UK,
Latvia, Estonia and the Netherlands.
Fintech in China stands out in terms of size but also its history and qualitative features.
Quantitatively, it took off in 2013-14 with a meteoric growth of P2P lending platforms (Chen,
2016). These numbered nearly 6,000 by 2016, but by the end of 2017 an absolute majority
went bankrupt, with many turning out to be digitally-enhanced Ponzi schemes (Buchanan and
Cao, 2018; Xiang et al., 2017). As a result, capital raised by FinTechs in China declined from
$358bn in 2017 to $215bn in 2018, while in the rest of the world it grew from $60bn to
$89bn (CCAF, 2020). Meanwhile, the Chinese big tech firms, with Alibaba and Tencent in
the lead, have developed formidable FinTech activities, arguably making big tech more
central to FinTech in China than anywhere else in the world (Shim and Shin, 2016; Gruin,
2019). Partly, this is due to Chinese state-controlled banking sector neglecting the needs of
retail customers and SMEs. But it is also underpinned by a special relationship between
FinTech and the state. As Gruin and Knaack (2020) stress, the Chinese government promotes
fintech as infrastructure that helps economic development, while at the same time ensuring it
does not undermine the Party control. This is achieved i.a. through ownership stakes and
Party committees in leading FinTech and big tech firms, and the social credit system under
development. As the internet market in China functions behind a ‘great firewall’, with limited
access to foreign companies, the international expansion of Chinese FinTech, led by their big
the firms, is likely to become a politically sensitive topic (Kenney and Zysman, 2020; Lai and
Samers, 2020).
Emerging econometric analyses examine factors that affect the distribution of FinTech by
country. Claessens et al. (2018) and Rau (2019) find that the FinTech credit market is larger
in countries with higher income per capita and a less competitive financial sector. Haddad
and Hornuf (2020) show that besides the general level of economic development FinTech
startup formation is positively affected by the availability of venture capital and the quality of
(internet and mobile phone) infrastructure. Laidroo et al. (2019) throw in a positive impact of
tertiary education, university-industry collaborations, and crisis experience. Results on the
influence of regulatory environment are mixed. While Rau (2019) and Laidroo et al. (2019)
find that regulatory quality and rule of law positively affect FinTech, according to Claessens
et al. (2018) the stringency of banking regulation is a drawback. Laidroo et al. (2019) also
indicate that the presence of strong ICT industry clusters in a country has a stronger positive
effect on FinTech than the presence of financial services clusters. In the only econometric
study conducted at subnational level, Cojoianu et al. (2020) show that knowledge and
productivity in the technology sector of a region may matter more for FinTech formation than
those in the financial sector.
The map of FinTech is spiky within and across countries, so it is unsurprising to see attempts
to rank FinTech centres. First off the blocks was the CCAF et al. (2018) report ranking 30
cities into: global (Beijing, San Francisco, New York, London, Shanghai, Hangzhou,
Shenzhen, in descending order); regional (e.g. São Paulo, Bangalore, Sydney, Paris, Berlin);
and emerging (e.g. Melbourne, Vilnius, Mexico City, Nairobi) FinTech hubs. Their ranking
has three components: industry, consumer experience, and ecosystem. GFCI (Z/Yen and
CDI, 2020) started ranking FinTech centres in September 2019, as part of the general Global
Financial Centre Index. Their top 5 in March 2020 were: New York, Beijing, Shanghai,
London and Singapore. Findexable (2019), the most recent and ambitious addition, is a
company employing an algorithm to rank cities and countries in real time, based on the
criteria of: quantity, quality, and the environment. Their top five FinTech hubs, in
descending order, were San Francisco,
London, New York, Singapore, and São Paulo. There was no city in the PR of China in the top
20. Findexable (2019: 95) explained this apparent bias against China with their focus on the
variety and number of FinTech firms rather than their size. They took pride in the fact that
almost half of top 100 FinTech hubs were in emerging markets, and many were not major
financial centres. They claim that FinTech breaks the link between the financial wealth of a
city and its commercial power; is a leveler, with smaller cities and remote regions able to
punch above their weight; and that FinTech success for a country or city takes focus – it is
not just an extension of start-up success. While Findexable has a commercial interest in
making the geography of FinTech look as distinctive as possible, these claims represent
important hypotheses for future research.
Geography of FinTech is subject to considerable heterogeneity and diversity in terms of

histories, products and services, investors, and governance. Institutional investors are the
dominant source of FinTech funding in the USA, while in China individuals prevail (CCAF
et al., 2018; Claeasens et al., 2018). New York, San Francisco and London are believed to
have built their FinTech sectors on the sophisticated demand from financial institutions, the
tech sector, and regulatory innovation, respectively (CCAF et al. 2018). FinTech
development in Brussels is based on banking and financial infrastructure companies
(Hendrikse, van Meeteren and Bassens, 2020). Nairobi and Johannesburg specialize in
payments technology (Findexable, 2019). Zook and Grote (2020) discuss the shift of initial
coin offerings for cryptocurrencies from centres in the USA and Switzerland to offshore
jurisdictions like the Cayman and British Virgin Islands. Sohns and Wójcik (2020) show the
overwhelming concentration of British FinTech in London, and examine the potential impact
of Brexit on the sector. Bhagat and Roderick (2020) uncover differences in access to FinTech
services in Kenyan refugee camps. Hasan et al. (2020) remind us how much FinTech in
China is conditioned by uneven access to the internet. There is enormous potential for
studying the geographical patterns of FinTech production and consumption, and emerging
data sources to facilitate such research.
IV Theoretical approaches to FinTech
Defining FinTech as a set of innovations and an economic sector keeps room open to
different theorisations of the phenomenon. Although most research on the topic is empirical
rather than theoretical (Gomber et al., 2017), broad contours of the conceptual side of the
debate can be sketched. Geographers have made contributions to this debate by elaborating
on the concepts of ecosystems and financial ecologies, the geographical nature of digital
platform economies, global production and financial networks (GPNs and GFNs) in relation
to FinTech, as well as the crucial role of scale in analyzing this phenomenon.
Ecosystem is probably the most popular concept applied to FinTech in academic literature,
and reigns supreme in grey literature (Leyshon, 2020). Consultants, think tanks, and FinTech
professionals seem fluent in ecosystem language (Hendrikse, van Meeteren and Bassens,
2020), not least because it is more fashionable than terms like industry and evokes
associations with symbiotic relationships and natural, benign impacts (Lee and Shin, 2018).
An ecosystem can be understood as “a group of interdependent actors that jointly develop a
set of complementary assets” (Grabher and König, 2020: 104). For Lai (2020) the FinTech
ecosystem is made of banks and non-bank financial institutions, big tech firms, FinTech
startups, and state entities as the main actors, while Lai and Samers (2020) also discuss the
potential of manufacturing firms to enter the FinTech arena. Literature varies in emphasis
placed on different actors. Sohns and Wójcik (2020), for example, use the theory of
entrepreneurial ecosystems, which focuses on FinTech startups. Hendrikse, van Meeteren and
Bassens (2020)
propose the concept of the Fin-Tech-State triangle. Groups of FinTech innovations are
referred to as ecosystems in their own right, e.g. blockchain (Rauchs et al., 2019); and
RegTech (regulatory technology) (CCAF and EY, 2019).
Closely related to ecosystems is the concept of financial ecologies (Leyshon et al., 2004;
Leyshon, 2020), which “recasts the financial system as a coalition of smaller constitutive
ecologies, such that distinctive groupings of financial knowledge and practices emerge in
different places with uneven connectivity and material outcomes” (Lai, 2016: 28). Building
on Langley (2016), Langley and Leyshon (2017) distinguish between five financial ecologies
in crowdfunding. While donation and rewards ecologies are driven by motives of charity,
fandom, and affect, equity, fixed income and P2P lending follow more closely the financial
logic. As such, the concept helps examine the variegated and uneven nature of FinTech.
FinTech is undeniably part of the digital platform economy (DPE). Approaching it as such
stresses its novel and transformative character, but one that can be reconciled with the notion
of ecosystems. Digital platforms are defined as “programmable digital infrastructures
controlled by platform operators who, as non-neutral intermediaries, curate the interactions of
interdependent complementors and users” (Grabher and König, 2020: 103); “a new
organisational form based on a relationship between the platform and the ecosystem of firms
dependent on the platform and users who interact and transact through it” (Kenney and
Zysman, 2020: 1); and from a political economy perspective as “a distinct mode of capitalist
enterprise that aggregates and analyses data and deploys digital infrastructures in order to
extract value from intermediation” (Langley and Leyshon, 2020: 7). Leaders of the DPE are
the five US platform giants, Apple, Amazon, Facebook, Google and Microsoft, along with
the Chinese firms Tencent and Alibaba, which in October 2019 constituted 7 of the 10 most
valuable firms in the world (Kenney and Zysman, 2020). All of them have FinTech activities,
focusing on digital payment platforms. Alibaba also developed an investment platform,
which became the world’s largest money market fund (Wang and Doan, 2018). Facebook has
launched Libra (Zook, 2020). Big tech “provides the highly centralised infrastructures upon
which the ‘sectoral platforms’ of FinTech are built and organised” (Langley and Leyshon,
2020: 10). This does not imply, however, that big tech is bound to dominate the FinTech
ecosystem. Arguably finance has always had a platform nature, which can now be
complemented with new technologies (Hendrikse, Bassens and van Meeteren, 2018). Haberly
et al. (2019), for example, show that in asset management DPE is driving more consolidation
and concentration, with spectacular growth of firms like Blackrock.
There is much potential to apply the frameworks of GPNs and GFNs to analyse FinTech,
though both need to be rethought in the light of FinTech. As Lai and Samers (2020, 6) argue,
FinTech blurs the boundary between production and finance, and “presents new opportunities
for reconceptualizing new models of value creation, value enhancement and firm upgrading”.
In this spirit, Haberly et al. (2019) propose a new typology of financial centres in GFNs that
accounts for the impacts of technology and DPE. Hendrikse, van Meeteren and Bassens
(2020) talk about strategic coupling between fin and tech. Wójcik and Cojoianu (2018)
discuss FinTech as convergence between fin and tech taking place at the level of business
models, firms, sectors, as well as financial centres.
Due to preference for conceptual novelty, words cluster or agglomeration are rarely used in
research on FinTech. Index providers seem to prefer the term FinTech hub rather than centre
(CCAF, 2018; Findexable, 2019). This should not detract anyone, particularly geographers,
from studying FinTech in relation to financial centres. Arguably, one obvious gap in FinTech
scholarship concerns the location of FinTech startups and other actors in the ecosystem. I
suspect that in many cities tech and FinTech firms and activities are crowding out more
conventional financial activities, changing the economic and social fabric of cities, and the
spatial organization of the economy in the process. If this reminds some readers of Vernon’s
product-life cycle theory, then perhaps it should. A lot of other concepts have been used to
explore FinTech. Transaction costs (Pesch and Ishamaev, 2019), network effects (Zachariadis
and Ozcan, 2017), and information asymmetries (Sangwan et al., 2019) in FinTech are
studied in relation to DPE and on their own. Shim and Shin (2016) use Actor Network
Theory, highlighting the role of non-human actors. Haberly et al. (2019) discuss centripetal
and centrifugal forces operating in and on FinTech. There is a need for geographers engaging
with FinTech to use both well-established theories and novel concepts.
FinTech is a fascinating topic at all scales of enquiry, from bodily to global. Bhagat and
Roderick (2020) examine the role of racialized bodies in access to FinTech. Zalan (2018)
highlights the ‘born global’ potential of FinTech startups. Wang and Doan (2018) show
FinTech evolution at Alibaba. FinTech activities and their internationalization at large banks
are illustrated through comparative cases studies by Lai (2020) and Chen et al. (2017).
Hendrikse, van Meeteren and Bassens (2020) elucidate the emergence of the FinTech
ecosystem, including incubators and accelerators, in Brussels. Gruin (2019) and Gruin and
Knaack (2020) illuminate the development of FinTech in China focusing on the national
scale. Zook and Blankenship (2018) examine Bitcoin in a global context, stressing the
materiality of its practices, including hardware, energy, and human agency. With theoretical
and methodological open-mindedness, geographers seem well-placed to make sense of
FinTech in a multi-scalar framework (Knight and Wójcik, 2020).
V Conclusion
In the first of two progress reports reviewing FinTech scholarship in and beyond geography, I
have concentrated on maps and concepts, starting with definitions, roots and taxonomies,
moving to empirical work charting the landscape of FinTech from global to local, and
finishing with theoretical approaches to the topic. In other words, I have focused on the what
and where of FinTech. In the second report, I will turn to the so what and where combination
by reviewing work on the impacts of FinTech on the financial sector and centres, regulation
and stability, inclusion and governance. My hope is to do some justice to the richness of
emerging research on FinTech, and the significance of FinTech as a phenomenon. Kenney
and Zysman (2020) claimed that economic geographers have underestimated the platform
economy. Geographers, not only financial and economic, should certainly not underestimate
FinTech. The good news is that given emerging geographical studies, and with FinTech
proper having only over a decade of history, and research thereon merely five years or so, we
have not missed the boat just yet.
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“Journal of Economics and

Emerging FinTech market: types and features of new financial

Keywords: financial technologies, FinTech, investment, start-up, innovations;

2.1 Types and features

2.2The Periodic Table of FinTech

Fig. 1 The Periodic Table of FinTech

FinTech Market Development Perspectives

Introduction also a threat for traditional financial institutes such as

natural persons) in the process of loan granting without

Furthermore, mobile banking is also developing.

Regarding the USA, there are other instruments of

6. C. Woolard, UK FinTech: Regulating for

Fintech as Financial Innovation – The Possibilities and

Svetlana Saksonova1, Irina Kuzmina-Merlino2

Keywords: fintech, competition, innovation in financial services.

JEL code: O16, G21, G23.

According to a report by Accenture (a global management consulting, technology

Тable 1. Investment in FinTech, 2014-2016 bln.US$ (KPMG, 2016).

Figure 1. Respondents to the Survey by Industry (authors’ calculations)

2.1 Areas of application of fintech industry innovative technology, advantages

Table 2. Overview of the areas of application of new technologies, competitors,

Lending  Banks; Successful competition of fintech

in deposits, convert currencies,

Infrastructure  B2B-FinTechs offering their Technologies related to security,

3. The Possibilities of Using Fintech in Latvia

Monea, Mintos, Twino and several others.

The authors conducted a survey of start-up businesses, who would be interested in

Most respondents were women (about 70 percent of all respondents, which is

0% 10% 20% 30% 40% 50% 60% 70%

Data Protection in Your Chosen Bank

Alternative Financial Service Providers in

Latvia Annual Price Increases in the Banking

Services Services Provided by the Bank

Unsurprisingly, most respondents viewed the annual growth of bank commissions

4. Conclusions and Recommendations

Several recommendations can be addressed to managers of fintech enterprises,

Aspects of Prioritization of Financial Tools for Stimulation of Innovative Activities.

Understanding FinTech start-ups – a

Abstract The financial sector is facing radical transforma-

FinTech characterizes the usage of digital

Today, FinTech start-ups cover many consumer-facing

Functional domain Justificatory references FinTech start-up examples

Peer-to-peer lending Chuen and Teo (2015) auxmoney, Lending Club

dominates the service encounter. In service-organization- dominated encounters of Fitzsimmons and

Fig. 1 Taxonomy development

Table 2 Taxonomy of the service offerings of consumer-oriented FinTech start-ups

Perspective Dimension Characteristics E/N1 It.2

communication is enabled between individual users.

The third perspective describes how FinTech start-ups

& Payment schedule – The payment schedule dimension

When analyzing the statistics from Table 3, some notable

Perspective Dimension Characteristics

1958) rather than more complex measures like the

Table 4 Archetypes of 227 real-life consumer-oriented FinTech start-up service offerings

sub-table) Contingency table for perspectives data and interaction

Interaction Pearson’s chi-squared

Contingency table for perspectives monetization and interaction

Contingency table for perspectives data and monetization

FinTech start-up sample

ID FinTech start-up Source

ID FinTech start-up Source

ID FinTech start-up Source