Fintech : an investigation into the opportunities and threats in relation to the Maltese banking industry

Abstract

It is safe to say that technology has affected the vast majority of industries in today’s world. Practically, every one of us has been influenced by this surge in technology in one way or another. After the great recession in 2008 we have witnessed regulatory reform as well as a change in the way consumers make use of traditional financial services. This has been a result of the advancements in financial innovation which has led to an increasing number of fintech start-ups which seek to disintermediate traditional financial firms with their unique, niche and personalized services. The EU’s Payment Services directive 2 (PSD2) has encouraged growth in fintech-oriented electronic money institutions and payment service providers across Malta not to mention the European Commission’s issuance of its fintech action-plan and the European Central Bank’s guidance on the licensing of fintech credit institutions. Therefore, the purpose of this research is to analyse the effect fintech is having on Malta’s financial services industry in particular, the opportunities and threats which the growth in fintech-oriented companies has presented to traditional banks in Malta and how they intend on responding to this rise in financial innovation. One key objective of this research is to investigate whether fintech will disrupt traditional financial institutions in Malta or whether there will be some kind of collaboration. Secondary data was gathered from existing multi-sourced and peer-reviewed data sources. The methodology used to gather the primary data was a qualitative one and semi-structured interviews were adopted. The results of this research represent the perspective of two local banks, two payment institutions and one regulator on the subject matter. Findings showed that there is a high level of awareness of fintech across Malta’s Financial Services Industry In fact, there is a considerable amount of collaboration between fintech-oriented payment service providers (PSPs) situated in Malta and traditional banks. That being said, on a global scale collaboration has been negligible considering the fact that the Maltese financial services industry is much smaller in scale compared to other markets. Moreover, a diverse range of results were obtained when addressing the opportunities and threats that fintech presents to traditional banks revealing it’s ambiguity. Lastly, it was concluded that more work is required for Malta to be considered at the forefront of the fintech industry.