An investigation of FinTech capabilities development: a study of start-up and incumbent firms
Creators: name: OSHODIN, Osemwonyemwen
Publisher: name: RMIT University
Year: 2024
Subjects: classificationCode: 350303
subject: Business information systems

description: Financial technologies (FinTech) are playing a role in contemporary innovations that are constantly emerging and changing the business environment in the financial industry. Start-ups and incumbent firms are among the main FinTech firms at the forefront of offering novel financial services that are facilitated and enabled by digital technologies. These primary FinTech firms are using technologies such as mobile computing, internet, or analytics to innovate products, business models and processes.

Incumbents and start-ups are endowed differently in terms of resources and competencies to develop FinTech-related capabilities. Moreover, the process of developing capabilities to deliver FinTech offerings remains under-researched but it is important to explain how start-up and incumbent financial institutions deliver transformative innovations. This study was therefore set to investigate (1) what, (2) how, and (3) outcomes of developing capabilities. The study was theoretically grounded in the disruptive innovation and dynamic capabilities theories and the sensing-and-responding framework.

The study involved three qualitative empirical case studies conducted using interviews and digital contents of firms in Australia. The first empirical study explored in the cases of 13 start-up firms (based on 14 interviews and 39 digital contents) how they develop their businesses and platforms during the inception, development, or growth phase of their lifecycle. Empirical Study 2 was carried out based on a review of 59 digital contents related to four incumbent banks to unravel the sensing-and-responding initiatives incumbents undertook in response to competition from FinTech start-ups. The third empirical study further developed the understanding of the processes of incumbents' FinTech capability development drawing on the experiences of three incumbent firms based on data collected from 10 key informants' interviews and 26 documents.
 
The findings of the research identified FinTech-specific normative, legitimacy and competitive triggers as well as historical differences in entrepreneurial and organisational tangible and intangible asset endowments that drive start-ups and incumbents to engage in the development of new or renewal of existing capabilities. Through four distinctive but interrelated actions of learning, leveraging, strategising, and (re)configuring, firms convert the external disruptive signals and marshal internal endowments into enhanced sensing, seizing and responding abilities, and embed those in their resources, processes and values. These strategic and dynamic capabilities contribute to FinTech product and process innovations as well as organisational performance.

The study makes three important contributions to IS scholarship.

First, through the analysis and synthesis of existing FinTech literature as well as a review of theories, it contributes theoretical frameworks that can be used in the investigation of FinTech-inspired or related capabilities to enhance the theoretical foundations of FinTech research.

Second the findings from the case studies of both FinTech start-ups and incumbents contribute to the empirical base of FinTech research in the IS domain.

Third, the study developed a new and integrated process model for understanding and explaining FinTech-related capabilities as well as a set of nomological validated propositions that can spur future IS research in FinTech but more broadly in digital innovations.

To practice, the study contributes by offering founders of FinTech start-ups and managers of incumbent financial institutions an understanding of the factors that could contribute to or influence the development processes towards delivering new FinTech offerings. The study also presents an integrated model on the development of FinTech capabilities that can offer firms insights on the actions for developing capabilities that can lead to achieving proximal (short- or medium-term) firm-level outcomes.