Can Fintech Foster Competition in the Banking System in Latin America and the Caribbean?
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Summary:
This paper revisits the competitive environment of the banking system in Latin America and the Caribbean (LAC) and investigates the early impact of fintech development in the region thus far. Against the backdrop of high net interest margins (NIMs) and limited financial depth in the region, panel regressions broadly confirm results of existing literature on the association of NIMs with the changes in the financial sector structure, including market concentration, administrative costs, and foreign banks, although differences between domestic and foreign banks narrowed after the 2008-09 Global Financial Crisis. Difference-in-difference regressions and case studies on Brazil and Mexico suggest that fintech is associated with a reduction in NIMs and defensive responses by incumbent banks that benefit consumers. The case studies also shed light on regulatory approaches and prudential considerations in fostering financial innovation and banking sector competition.
Series:
Working Paper No. 2021/114
Subject:
Commercial banks Competition Financial institutions Financial markets Financial services Fintech Foreign banks Real interest rates Technology
Frequency:
regular
English
Publication Date:
April 29, 2021
ISBN/ISSN:
9781513573823/1018-5941
Stock No:
WPIEA2021114
Pages:
40
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