How Valuable Is FinTech Innovation?

TLDR

The study provides large-scale evidence on the occurrence and value of FinTech innovation. The authors use patent filing data from 2003 to 2017 and machine learning to identify and classify FinTech innovations by technology. Most FinTech innovations generate substantial value, with blockchain, IoT, and robo‑advising being the most valuable, while disruptive technologies from nonfinancial startups harm financial industries, though market leaders who heavily invest in their own innovation can mitigate this negative impact. Received May 31, 2017; editorial decision September 30, 2018 by Editor Andrew Karolyi.

Abstract

We provide large-scale evidence on the occurrence and value of FinTech innovation. Using data on patent filings from 2003 to 2017, we apply machine learning to identify and classify innovations by their underlying technologies. We find that most FinTech innovations yield substantial value to innovators, with blockchain being particularly valuable. For the overall financial sector, internet of things (IoT), robo-advising, and blockchain are the most valuable innovation types. Innovations affect financial industries more negatively when they involve disruptive technologies from nonfinancial startups, but market leaders that invest heavily in their own innovation can avoid much of the negative value effect. ReceivedMay 31, 2017; editorial decision September 30, 2018 by Editor Andrew Karolyi.