FINTECH AND THE FUTURE OF SMALL BUSINESS LENDING: AN APPLICATION EXAMPLE

Arturo Capasso, Matteo Rossi, László Koloszár, Giuseppe Festa

Abstract


Digital innovation technologies are part of the so-called Digital Transformation (DT); also in the financial sector, DT has become an imperative for companies. A branch of DT is the Digital Finance (DF) and in the last decade, DF (also known as FinTech) has become more and more popular. In a nutshell, DF is the Internet-based generation of traditional finance, and it represents a revolution currently taking place in the financial system; at the same time, FinTech has had an impact on both incumbents, with a change of the business models, and on new competitors, i.e., DF Start-ups. In this exploratory research, a case study has been longitudinally investigated, in which the unit of analysis is a finance firm and not a finance project (i.e., adopting an institutional, and not occasional, point of view). More specifically, the top management of FX12 (Naples, Italy) has been contacted, with several interviews over three months; this start-up was founded in 2019, for assisting the financing of Small and Medium Enterprises (SMEs). The FX12 case study demonstrates that FinTech companies could also support Small Business Lending (SBL), implicating that FinTech can also play a fundamental role in funding local economic growth. Limits of the research and potential developments are then discussed.

Parole chiave


Small and Medium Enterprises; SMEs; Small Business Lending; FinTech; Digital Transformation; Digital Finance

Riferimenti bibliografici


Agarwal, S., & Hauswald, R. (2010), “Distance and private information in lending”, The Review of Financial Studies, Vol. 23 No. 7, pp. 2757-2788.

Beck, T., & Demirgüç-Kunt, A. (2006), “Small and Medium-Size Enterprises: Access to Finance as a Growth Constraint”, Journal of Banking and Finance, Vol. 30 No. 11, pp. 2931-2943.

Beck, T., Demirgüç-Kunt, A., & Masimovic V. (2005), “Financial and legal constraints to growth: does firm size matter?”, Journal of Finance, Vol. 60 No. 1 pp. 137-177.

Berger, A.N., Miller, N.H., Petersen, M.A., Rajan, R.G., & Stein, J.C. (2005), “Does function follow organizational form? Evidence from the lending practices of large and small banks”, Journal of Financial Economics, Vol. 76 No. 2, pp. 237-269.

Berkmen, P., Beaton, K., Gershenson, D., Arze del Granado, J., Ishi, K., Kim, M., Kopp, E., & Rousset, M. (2019), “FinTech in Latin America and the Caribbean: Stocktaking”, IMF Working Paper, (19/71), pp. 1-53.

Blancher, N.R., Appendino, M., Biboloy, A., Fouejieu, A.P., Li, J., Ndoye, A., Panagiotakopoulou, A., Shi, W., & Sydorenko, T. (2019). “Financial Inclusion of Small and Medium-Sized Enterprises in the Middle East and Central Asia”, International Monetary Fund Middle East and Central Asia Departmental Paper, (19/02), pp. 1-73.

Boot, A.W.A., & Thakor, A.V. (2000), “Can relationship banking survive competition?”, The Journal of Finance, Vol. 55 No. 2, pp. 679-713.

Chatterjee, S., Chaudhuri, R., & Vrontis, D. (2022), "Big data analytics in strategic sales performance: mediating role of CRM capability and moderating role of leadership support", EuroMed Journal of Business, Vol. 17 No. 3, pp. 295-311.

Cornelli, G., Frost, J., Gambacorta, L., & Jagtiani, J. (2022), “The impact of FinTech lending on credit access for U.S. small business”, BIS Working Papers, (1041), pp. 1-43.

Cornelli, G., Frost, J., Gambacorta, L., Rau, R., Wardrop, R., & Ziegler, T. (2020), “FinTech and Big Tech Credit: A New Database”, BIS Working Paper, (887), pp. 1-35.

Dapp, T.M. (2015), “FinTech Reloaded - Traditional Banks as Digital Ecosystems: With Proven Walled Garden Strategies into the Future”, Deutsche Bank Research Working Paper, pp. 1-27.

De Young, R., Lang, W.W., & Nolle, D.L. (2007), “How the Internet Affects Output and Performance at Community Banks”, Journal of Banking and Finance, Vol. 31 No. 4, pp. 1033-1060.

Dimitropoulos, P., Koronios, K., Thrassou, A., & Vrontis, D. (2020), "Cash holdings, corporate performance and viability of Greek SMEs: Implications for stakeholder relationship management", EuroMed Journal of Business, Vol. 15 No. 3, pp. 333-348.

Drasch, B.J., Schweizer, A., & Urbach, N. (2018), “Integrating the “Troublemakers”: A Taxonomy for Cooperation between Banks and FinTechs”, Journal of Economics and Business, Vol. 100 No. (2018), pp. 26-42.

Economist Intelligence Unit (2015), “The Disruption of Banking”, available at https://impact.economist.com/perspectives/technology-innovation/disruption-banking/white-paper/disruption-banking (last access 21 September 2023).

Fasano, F., & Cappa, F. (2022), “How do banking FinTech services affect SME debt?”, Journal of Economics and Business, Vol. 121 No. (2022), Article 106070, pp. 1-12.

Ferri G., Murro P. (2015), “Do firm–bank “odd couples” exacerbate credit rationing?”, Journal of Financial Intermediation, Vol. 24 No. 2, pp. 231-251.

Financial Stability Board (2019), “Evaluation of the Effects of Financial Regulatory Reforms on Small and Medium-Sized Enterprise (SME) Financing – Consultative Document”, FSB.

Gai, K., Qiu, M., & Sun, X. (2018), “A Survey on FinTech”, Journal of Network and Computer Applications, Vol. 103 No. (2018), pp. 262-273.

Gan, J., & Riddiough, T.J. (2008), “Monopoly and Information Advantage in the Residential Mortgage Market”, The Review of Financial Studies, Vol. 21 No. 6, pp. 2677-2703.

Gimpel, H., Rau, D., & Roglinger, M. (2018), “Understanding FinTech Start-Ups – a Taxonomy of Consumer-Oriented Service Offerings”, Electronic Markets, Vol. 28 No. (2018), pp. 245-264.

Goetz, M.R. (2011), “Bank organization, market structure and risk taking: evidence and theory from U.S. Commercial Banks”, Federal Reserve Bank of Boston Working Paper, (15), pp. 1-65.

Gomber, P., Koch, J.A., & Siering, M. (2017), “Digital Finance and FinTech: current research and future research directions”, Journal of Business Economics, Vol. 87 No. 5, pp. 537-580.

Greenbaum, S.I., Thakor, A.V., & Boot, A.W.A. (2016). Contemporary Financial Intermediation, (3rd ed). Amsterdam. NL: Elsevier.

Jack, W., & Suri, T. (2014), “Risk Sharing and Transactions Costs: Evidence from Kenya’s Mobile Money Revolution”, The American Economic Review, Vol. 104 No. 1, pp. 183-223.

Kapoor, A. (2014), “Financial inclusion and the future of the Indian economy”, Futures, Vol. 56 No. (2014), pp. 35-42.

Klöhn, L., & Hornuf, L. (2012), “Crowdinvesting in Deutschland – Markt, Rechtslage und Regulierungsperspektiven”, Zeitschrift für Bankrecht und Bankwirtschaft, Vol. 24 No. 4, pp. 237-320.

Loukoianova, E., Davidovic, S., Sullivan, C., & Tourpe, H. (2019), “Strategy for FinTech Applications in the Pacific Island Countries”, International Monetary Fund APD Departmental Paper, (2019/14), pp. 1-66.

Lukonga, I. (2018), “FinTech, Inclusive Growth and Cyber Risks: Focus on the MENAP and CCA Regions”, International Monetary Fund Working Paper, (2018/201), pp. 1-51.

Manyika, J., Lund, S., Singer, M., White, O., & Berry, C. (2016), “Digital finance for all: Powering inclusive growth in emerging economies”, McKinsey Global Institute, pp. 1-24.

Marinč, M. (2013), “Banks and information technology: marketability vs. relationships”, Electronic Commerce Research, Vol. 13 No. (2013), pp. 71-101.

Myers, S., & Majluf, N. (1984), “Corporate financing and investment decision when firms have information that investors do not have”, Journal of Financial Economics, Vol. 13 No. 2, pp. 187-221.

Nier, E., & Baumann, U. (2003), “Market discipline and financial stability: some empirical evidence”, Financial Stability Review, Vol. 13 No. (2003), pp.:134-141.

Ozili, P.K. (2018), “Impact of digital finance on financial inclusion and stability”, Borsa Istanbul Review, Vol. 18 No. 4, pp. 329-340.

Pettigrew, A.M. (1997), “What is processual analysis?”, Scandinavian Journal of Management, Vol. 13 No. 4, pp. 337-348.

Stein, J.C. (2002), “Information Production and Capital Allocation: Decentralized versus Hierarchical Firms”, The Journal of Finance, Vol. 57 No. (2002), pp. 1891-1921.

Stiglitz, J.E., & Weiss, A. (1981), “Credit Rationing in Markets with Imperfect Information”, The American Economic Review, Vol. 71 No. 3, pp. 393-410.

Thomas, L. (2020), “Longitudinal Study: Definition, Approaches & Examples”, available at https://www.scribbr.com/methodology/longitudinal-study/ (last access 21 September 2023).

Tornjanski, V., Marinković, S., Săvoiu, G., & Čudanov, M. (2015), “A Need for Research Focus Shift: Banking Industry in the Age of Digital Disruption”, Econophysics, Sociophysics & Other Multidisciplinary Sciences Journal, Vol. 5, No. 3, pp.: 11–15.

World Bank Group (2022), “FinTech and SME Finance: Expanding Responsible Access”, available at https://ncfacanada.org/wp-content/uploads/2022/05/7-SME-Note.pdf (last access 21 September 2023).

Zhang, A.L., Wang, S.Y., Liu, B., & Liu, P. (2022), “How FinTech impacts pre- and post-loan risk in Chinese commercial banks”, International Journal of Finance & Economics, Vol. 27 No. 2, pp. 2514-2529.

Ziegler, T., Shneor, R., Wenzlaff, K., Wang, B., Kim, J., Odorovic, A., Ferri de Camargo Paes, F., Suresh, K., Zhang, B., Johanson, D., Lopez, C., Mammadova, L., Adams, N., & Luo D. (2020), “The Global Alternative Finance Market Benchmarking Report”, available at https://www.jbs.cam.ac.uk/wp-content/uploads/2020/08/2020-04-22-ccaf-global-alternative-finance-market-benchmarking-report.pdf (last access 21 September 2023).




ISSN: 1971-5293

ISSNe: 2283-3374

Esperienze d'Impresa, Reg. Tribunale Salerno n. 875 del 3/11/1993