Can Fintech Foster Competition in the Banking System in Latin America and the Caribbean?

By Suchanan Tambunlertchai, Pablo Bejar, Kotaro Ishi, Takuji Komatsuzaki, Ippei Shibata, Jasmin Sin

April 29, 2021

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Format: Chicago

Suchanan Tambunlertchai, Pablo Bejar, Kotaro Ishi, Takuji Komatsuzaki, Ippei Shibata, and Jasmin Sin. Can Fintech Foster Competition in the Banking System in Latin America and the Caribbean?, (USA: International Monetary Fund, 2021) accessed November 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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.

Subject: Commercial banks, Competition, Financial institutions, Financial markets, Financial services, Fintech, Foreign banks, Real interest rates, Technology

Keywords: Banking sector competition, Caribbean, Commercial banks, Competition, Fintech, Foreign banks, Global, Market share, Net interest margins, Panel regression, R p rotec tio n, Real interest rates

Publication Details

Pages:

40
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2021/114
Stock No:

WPIEA2021114
ISBN:

9781513573823
ISSN:

1018-5941

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