The impact of investments in Turkish fintechs on banks' stock returns

The financial sector has successfully kept up with digital transformation until the end of the twentieth century by being among the sectors with the largest spending on information technologies. However, since the beginning of the millennium, it has slowed down in generating financial innovation, had adoption lag for new generation technologies such as big data, artificial intelligence, open API, cloud computing, mobile, IoT, and distributed ledger. In addition, after the global crisis of 2008, banks all over the world as the most important actors of the sector experienced loss of profit due to stricter regulations, tightening lending terms and low interest rate environment. Since unethical behaviors of traditional financial institutions had a large share on the emergence of the global crisis with destructive effects, the trust in banks was deteriorated. Around the same period, as tech companies build their business models on new generation technologies, their consumers were accustomed to personalized services, multi-channel distribution, easy-to-understand products, seamless integration and 24/7 support, so the same service quality was started to be expected from the traditional organizations as well. Therefore a gap has emerged in the financial services market that regulation free Fintechs providing alternative financial solutions with the help of new technologies, started to fill. In the emprical section of this study, the effect of the investments received by Fintechs in Turkey on one of banks' financial performance indicators; stock returns is examined. The main data used in the research are the monthly Fintech investment amounts and the stock returns of the banks that are listed on BIST exchange, between the years 2014-2019. The method used to study the data set is panel data analysis. The final regression model obtained as a result of the tests carried out was estimated by a technique that is resistant to deviations from basic assumptions and it was concluded that the investments received by Fintech companies has a negative but very low effect on bank's stock returns.