Between disintermediation and ahead-on competition

Strategic responses of established banks to two cases of competitive change

Oral Defense sheduled July 8th 2024 at Talan Group, 14 rue Pergolèse 75116 Paris, Salle Event center

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Abstract:

The question of how large and established firms react to the rise of new entrants is a contemporary issue for managers in today’s competitive environment and an issue that is frequently discussed in the literature. Understanding in depth the response mechanisms employed by established firms, how these responses are contingent upon specific variables and understanding why some responses perform better than others is therefore of the utmost importance. This thesis questions the way involved actors deal with this type of empirical situation. 

To answer this question, the research carried out focused on the case of the banking industry which has experienced since 2010 the rise of startups referred to as Fintech startups. These startups are diverse in nature and operate in different business segments traditionally operated by banks. We chose to focus on two categories of Fintechs that allow us to discuss the competitive as well as the collaborative dynamic between established banks and rising Fintech startups. First, Fintechs addressing the Banking/Payment segment referred to as challenger banks which emerged with the goal of creating a modern, 100% digital banking experience and offering an improved value proposition. Second, third party providers that include account aggregators and payment initiators which also put banks under pressure by raising concerns about a risk of disintermediation of their relationships with end customers. 

The reliance on a flexible research design was a key dimension in this research along with the combination of two types of case study designs and the use of different approaches such as the use of narratives and the use of methodological and theoretical templates as a form of inquiry of the field. 

The longitudinal investigation of the field has allowed us to achieve the following results. First, we discuss four types of strategic responses put in place by established banks to respond to the emergence of Fintech startups namely coopetition, imitation, the integration of Fintech technologies and the creation of a Fintech ecosystem.

Second, we discuss the sequencing of the responses over time and the vehicles that are used by firms to initiate their responses. Third, we discuss the efficiency of these responses and their outcomes for large banks. 

The contributions of this doctoral work are multi-faceted, given the wide range of settings investigated. On the general level, we contribute to the literature on strategic responses of large and established firms to market change and contribute to the incumbent-new entrant dynamic by investigating three aspects: the time and typology of responses employed by large and established firms and the initiators of these responses. 

We also contribute to more specific literatures such as the literature on asymmetrical coopetition, which is an emerging literature in search of theorization and empirical contributions. We also contribute to the literature on the role of third-parties and institutional players in the development of coopetition. 

We additionally contribute to the literature on business models by taking the business model as an emerging domain of application of different theories such as the theory of imitation and concepts such as coopetition.

Keywords: Banks, Fintechs, Strategic responses, Competitive dynamics, Competitive strategy, Regulation

Composition of jury :