Entry of FinTech Firms and Competition in the Retail Payments Market
- Authors
- Jun, Jooyong; Yeo, Eunjung
- Issue Date
- Apr-2016
- Publisher
- WILEY-BLACKWELL
- Keywords
- FinTech; Entry; Retail payment; Front-end; End-to-end
- Citation
- ASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES, v.45, no.2, pp 159 - 184
- Pages
- 26
- Journal Title
- ASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES
- Volume
- 45
- Number
- 2
- Start Page
- 159
- End Page
- 184
- URI
- https://scholarworks.bwise.kr/cau/handle/2019.sw.cau/7125
- DOI
- 10.1111/ajfs.12126
- ISSN
- 2041-9945
2041-6156
- Abstract
- We investigate the effects of entry of financial technology (FinTech) based firms on competition in the retail payments market. With a model of two-sided market with vertical restraints, we derive the following results. When only the entry of a vertically integrated (or end-to-end service) provider is allowed, either all merchants opt for multi-homing or no entry occurs, regardless of the regulatory requirement. On the other hand, if the entry of a downstream-only (or front-end service) provider is allowed, a partial multi-homing equilibrium could emerge under certain conditions, in which the entry of an end-to-end service provider does not occur. Without regulation, however, the vertically integrated incumbent does not voluntarily provide the back-end service to the entrant in general. This suggests the need for proper regulatory measures to reach a socially desirable outcome from the new entry in the retail payments market.
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