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arXiv · 2601.14071

How Disruptive is Financial Technology?

Douglas Cumming·Hisham Farag·Santosh Koirala·Danny McGowan
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Abstract

We study whether Fintech disrupts the banking sector by intensifying competition for scarce deposits funds and raising deposit rates. Using difference-in-difference estimation around the exogenous removal of marketplace platform investing restrictions by US states, we show the cost of deposits increase by approximately 11.5% within small financial institutions. However, these price changes are effective in preventing a drain of liquidity. Size and geographical diversification through branch networks can mitigate the effects of Fintech competition by sourcing deposits from less competitive markets. The findings highlight the unintended consequences of the growing Fintech sector on banks and offer policy insights for regulators and managers into the ongoing development and impact of technology on the banking sector.

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Douglas Cumming, Hisham Farag, Santosh Koirala, Danny McGowan. 2026-01-28. How Disruptive is Financial Technology?. https://arxiv.org/abs/2601.14071

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