A study titled “Banking FinTech and Stock Market Volatility: The BIZUM Case”, written by our researchers Emili Vizuete Luciano, Ana Maria Gil Lafuente and our PhD alumnus Laura Arenas provides key insights into how the adoption of disruptive technology by incumbent banks affects stock price volatility.

This research examines the 2016 adoption of BIZUM, a Spanish real-time digital payment solution, by major incumbent banks. Using a GARCH-M GED approach, the study finds that the implementation of BIZUM led to a significant reduction in the stock price volatility of the participating banks, offering valuable lessons for investors, policymakers, and regulators.

Introduced as a response to the European Central Bank’s call for immediate transfers, BIZUM was launched in 2016 as a joint initiative by 27 Spanish banks. It allowed for real-time, seamless payments without requiring users to change banks. With over 70% of Spanish banking customers adopting BIZUM in its first five years, this innovation became a key defense mechanism for traditional banks against the disruption posed by FinTech competitors.

By analyzing the daily stock returns of six major Spanish banks (Bankia, Bankinter, BBVA, CaixaBank, Sabadell, and Santander) from 2013 to 2020, the study highlights a marked reduction in stock price volatility following BIZUM’s introduction. Volatility decreases ranged from 25.30% to 60.11%, with a median reduction of 30.96%. Bankinter experienced the most pronounced effect, while Santander saw the least impact.

The findings suggest that investors recognized the competitive advantages of BIZUM, welcoming its role in mitigating market risks. These results align with the theory that FinTech can complement incumbent banks by enhancing their business models rather than disrupting them entirely.

For investors, the study underscores the potential benefits of adopting FinTech strategies, as reduced volatility can attract risk-averse profiles and signal stability. Regulators, on the other hand, can draw lessons from BIZUM’s success to balance innovation with financial stability, ensuring that technological advancements do not compromise prudential soundness.

This study contributes to the broader literature on FinTech and its integration into traditional banking, providing evidence from a real-world ex-post implementation. It highlights the importance of collaboration between incumbents and FinTech players and emphasizes the need for regulators to address emerging risks, such as IT dependency and cyber threats, as part of their forward-planning strategies.

The authors call for further research to generalize findings across different markets and timeframes, emphasizing the need for extended samples, econometric refinements, and cross-country comparisons. They also suggest exploring how different investment stages impact the relationship between FinTech adoption and stock price volatility.

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