The Effects of Open Banking on FinTech Firms’ Dynamics and Funding Structure

Andrés Alonso-Robisco, José Manuel Carbó, Pedro Jesús Cuadros-Solas, and Jara Quintanero

♦ This paper investigates the impact of open banking on the dynamics of fintech firms. Using a unique dataset of Spanish fintech firms from 2014 to 2022, we exploit differential exposure to Europe’s open banking regulation between payment-focused fintech firms and other fintech firms. Following the regulation, payment-service fintechs exhibit improved performance and a restructuring of their funding, characterized by reduced reliance on long-term bank debt and increased use of market-based equity. These firms also increase liquidity, reduce labor intensity, raise labor costs, and enhance productivity. These findings provide novel firm-level evidence on the effects of data-sharing regulation in financial markets.

Read it here.