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Banks Versus Fintech: At Last, it's Official

In recent years, we have witnessed a substantial amount of discussion, but little empirical evidence, about the threat that financial technology (“fintech”) firms pose to the established banking sector. We seek to contribute such evidence by analyzing explicit mentions of competition from fintech in U.S. banks’ annual reports. Surprisingly, there were no such mentions prior to 2016. We identify 14 banks that acknowledge being threatened by fintech companies. These banks represent only 3 percent of the banking sector by count but nearly a third of its assets. While this fintech-mentioning group is skewed toward large banks, its characteristics and valuation differ little from those of other banks of comparable size. On the other hand, there is some evidence that banks that have expressed concern about fintech competition are more likely to be involved in the fintech space themselves. Overall, banks that have formally voiced their concern about fintech competition seem, if anything, to be better equipped to weather it.