Journal of Economics and Economic Education Research (Print ISSN: 1533-3590; Online ISSN: 1533-3604)


Market Structure and Government Policy Implications of Fintech and the Digital Transformation of Financial Services

Author(s): Marie Dolgui

Financial intermediaries are created by economic frictions such as information asymmetries and economic pressures such as economies of scale and scope. These squabbles and Market structure is also shaped by forces. While technical advancements are nothing new to the world, in the field of finance, digital innovation has resulted in significant gains in connection. Systems, in terms of computing power and cost, and in terms of freshly generated and useable data These Improvements have reduced transaction costs and opened up new business opportunities. New entrants and models as technology have advanced, so has the flow of information. Financial services could be produced more cheaply with lower transaction costs disaggregated. Financial services have been unbundled by specialized players, allowing consumers to locate and assemble their desired product suites. Classic, on the other hand, even in the age of digital production, economic forces are still essential. Many components of financial services production, including client acquisition, finance, compliance operations, data, and capital, benefit from economies of scale and scope and network effects (including trust capital). Despite technological advancements, consumer search and assembly expenses remain high. Large multi-product providers, such as technology (big tech) corporations entering into financial services from adjacent industries, benefit from these factors, which encourage re-bundling. The digital transformation of financial services raises a slew of policy concerns about competitiveness, regulatory boundaries, and assuring a level playing field. A "barbell" outcome with a few large suppliers and numerous specialized competitors is one possible conclusion in terms of competition, concentration, and market composition. To handle trade-offs between stability and integrity, competitiveness and efficiency, and consumer protection and privacy, authorities must communicate across financial regulation, competition, and industry regulatory organizations.

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