The Economics of FinTech
Understanding Digital Transformation in Financial Services
by Fabozzi, Imerman
| ISBN: | Copyright 2025
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A groundbreaking, comprehensive exploration of how FinTech innovation is reshaping finance.
Technological innovation has shaped the role of finance since the introduction of the ATM in the 1960s, but never more consequentially than by the massive digital revolution in the financial services industry known as FinTech. The Economics of FinTech is a comprehensive introduction to this rapidly evolving and increasingly important domain, and a groundbreaking exploration of how FinTech is reshaping finance. Michael Imerman and Frank Fabozzi distill the dynamic developments of this multidisciplinary field into a cohesive, accessible guide that covers the economic underpinnings of FinTech innovation, framed within the established principles of financial intermediation, management theory, and data science. Coverage includes in-depth analysis of emerging technologies and innovations across various sectors of financial services as well as the entrepreneurial finance of FinTech such as funding, valuation, and startup management.
•The first book to examine the economic principles of FinTech innovation
•Comprehensive coverage of financial technologies across various sectors in financial services
•Ideal for undergraduate and graduate students as well as entrepreneurs, investors, and finance professionals
•Instructor resources include solutions, slides, and case studies
| Expand/Collapse All | |
|---|---|
| Cover (pg. Cover) | |
| Contents (pg. vii) | |
| Preface (pg. ix) | |
| Acknowledgments (pg. xiii) | |
| About the Authors (pg. xv) | |
| I. Conceptual Framework (pg. 1) | |
| 1. Introduction to FinTech Innovation (pg. 3) | |
| What is Fintech Innovation? (pg. 4) | |
| The Fintech Ecosystem (pg. 5) | |
| The Value Proposition of Fintech (pg. 19) | |
| Fintech Innovation: Disruptive Versus Sustaining? A Checklist (pg. 20) | |
| Organic Versus Inorganic Innovation (pg. 24) | |
| Putting It Together: The Fintech Innovation Matrix (pg. 25) | |
| Mini-Case: Intuit (pg. 26) | |
| Key Terms and Concepts (pg. 31) | |
| End-of-Chapter Questions (pg. 32) | |
| 2. The Economics of the FinTech Revolution (pg. 33) | |
| Creative Destruction and Innovation Cycles (pg. 34) | |
| The Fintech Revolution (pg. 43) | |
| Peter Drucker’s Sources of Innovation Applied to the Fintech Revolution (pg. 46) | |
| Behavioral Economics and Gamification (pg. 53) | |
| The Gafamat Effect (pg. 59) | |
| Key Terms and Concepts (pg. 64) | |
| End-of-Chapter Questions (pg. 65) | |
| 3. Data Science and Its Role in FinTech* (pg. 67) | |
| Importance of Data Science (pg. 68) | |
| Big Data (pg. 71) | |
| Artificial Intelligence (pg. 73) | |
| Machine Learning (pg. 74) | |
| Natural Language Processing (pg. 85) | |
| Image Recognition (pg. 88) | |
| Key Terms and Concepts (pg. 89) | |
| End-of-Chapter Questions (pg. 90) | |
| 4. Financial Intermediation (pg. 93) | |
| The Economics of Financial Intermediation (pg. 94) | |
| Banks and Banking (pg. 99) | |
| Insurance (pg. 107) | |
| How Digital Transformation is Affecting Financial Intermediation (pg. 112) | |
| Regulation (pg. 115) | |
| Key Terms and Concepts (pg. 119) | |
| End-of-Chapter Questions (pg. 120) | |
| II. Managing and Financing FinTech (pg. 123) | |
| 5. Risk and Risk Management for FinTech (pg. 125) | |
| Measuring and Managing Financial Risk? (pg. 126) | |
| Standard Risks in Financial Services and Applications to Fintech (pg. 128) | |
| Novel Risks with Emerging Technologies in Finance (pg. 133) | |
| The Importance of Having A Chief Risk Officer (pg. 151) | |
| Key Terms and Concepts (pg. 153) | |
| End-of-Chapter Questions (pg. 153) | |
| 6. Sources of Financing for FinTech Companies (pg. 155) | |
| Growth of Startup Financing in The Fintech Revolution (pg. 157) | |
| Stages of a Venture (pg. 157) | |
| Stages of Business Development and Financing (pg. 158) | |
| Preliquidation Stages of Financing (pg. 159) | |
| Pre-Ipo Expansion Financing (pg. 162) | |
| Initial Public Offering (pg. 166) | |
| Securitization and Its Use By Fintech Companies (pg. 172) | |
| Key Terms and Concepts (pg. 178) | |
| End-of-Chapter Questions (pg. 180) | |
| 7. Financing Vehicles and Equity Options (pg. 181) | |
| Equity, Debt, and Hybrids (pg. 182) | |
| Funding Instruments (pg. 183) | |
| Term Sheets (pg. 191) | |
| Founders’ Stock (pg. 196) | |
| Equity Award Plans (pg. 199) | |
| Premoney and Postmoney Valuation (pg. 202) | |
| Startup Fintech, Inc. Economics Of Fintech Vc (Efvc) (pg. 207) | |
| Key Terms and Concepts (pg. 207) | |
| End-of-Chapter Questions (pg. 209) | |
| 8. How to Value a FinTech Startup* (pg. 211) | |
| Traditional Valuation Models (pg. 213) | |
| Valuation of Financial Sector Companies: Traditional Approaches (pg. 216) | |
| Understanding the Components Of Fintech Valuation (pg. 218) | |
| The Stages of Fintech Development And Investor Profiles (pg. 220) | |
| How to Value a Fintech Startup: Valuation Methods (pg. 221) | |
| Is Valuation an Art or Science? (pg. 226) | |
| Valuation Case: Transferwise (pg. 226) | |
| Key Terms And Concepts (pg. 238) | |
| End-of-Chapter Questions (pg. 238) | |
| III. FinTech Deep Dives (pg. 241) | |
| 9. Payments Technology (pg. 243) | |
| Backround on Payments Technology (pg. 244) | |
| Modern Payments Technologies and the Role of Fintech (pg. 250) | |
| The Gafamat Effect (pg. 264) | |
| Trends in Payments Technology and What Is Coming Next (pg. 265) | |
| Key Terms and Concepts (pg. 266) | |
| End-of-Chapter Questions (pg. 267) | |
| 10. Digital Banking (pg. 269) | |
| The Rise of Digital Banking (pg. 270) | |
| Imagining the Future of Banking (pg. 273) | |
| Types of Digital Banks: Digital Spinoffs, Neo-Banks, and Challenger Banks (pg. 283) | |
| Response by the Incumbents (pg. 290) | |
| Open Banking, Banking-as-a-Service, and Platform-as-a-Service (pg. 301) | |
| The Gafamat Effect in Digital Banking (pg. 304) | |
| Key Terms and Concepts (pg. 304) | |
| End-of-Chapter Questions (pg. 305) | |
| 11. FinTech Lending (pg. 307) | |
| Nonbank Lenders and Fintech Innovation (pg. 308) | |
| Fintech Companies and the Provision of Credit (pg. 309) | |
| Different Types of Fintech Lenders (pg. 312) | |
| Mini-Case: Commonbond (pg. 335) | |
| Key Terms and Concepts (pg. 339) | |
| End-of-Chapter Questions (pg. 340) | |
| 12. Digital Wealth Management (pg. 343) | |
| Innovations in Wealth Management (pg. 344) | |
| Wealth Management Versus Asset Management (pg. 344) | |
| The Robo-Advisor Industry (pg. 345) | |
| Direct Indexing (pg. 359) | |
| Incumbents’ Response and Consolidation in Digital Wealth Management (pg. 362) | |
| Key Terms and Concepts (pg. 366) | |
| End-of-Chapter Questions (pg. 366) | |
| 13. InsurTech (pg. 369) | |
| Disrupting the Insurance Industry (pg. 370) | |
| Themes Underlying Insurtech (pg. 371) | |
| Structure of the Insurance Industry and Innovators in the Insurtech Vertical (pg. 372) | |
| Digital Transformation and the Economics of Insurtech (pg. 376) | |
| Insurtech Innovations (pg. 381) | |
| Digitalization for the Incumbents (pg. 383) | |
| Gafamat and Insurance (pg. 387) | |
| Key Terms and Concepts (pg. 389) | |
| End-of-Chapter Questions (pg. 390) | |
| 14. PropTech and Real Estate FinTech (pg. 391) | |
| Digital Transformation in the Real Estate Industry (pg. 392) | |
| Why Real Estate is a Prime Candidate for Fintech (pg. 393) | |
| What is Proptech? (pg. 396) | |
| Proptech Verticals (pg. 397) | |
| Disruption of Real Estate Fintech (pg. 403) | |
| Key Terms and Concepts (pg. 404) | |
| End-of-Chapter Questions (pg. 406) | |
| 15. Decentralized Finance and Blockchain Technology (pg. 409) | |
| What is Decentralized Finance? (pg. 410) | |
| Introduction to Blockchain (pg. 412) | |
| Digital Transformation and the Three Rs (pg. 414) | |
| Is Blockchain a Disruptive Financial Technology? (pg. 418) | |
| Blockchain and Smart Contracts (pg. 418) | |
| Applications of Blockchain Technology in Financial Services (pg. 420) | |
| Central Bank Digital Currencies (pg. 432) | |
| Issues in Implementation of Blockchain and Defi (pg. 436) | |
| Future Developments (pg. 439) | |
| Key Terms and Concepts (pg. 439) | |
| End-of-Chapter Questions (pg. 440) | |
| Index (pg. 441) | |
Frank J. Fabozzi
Frank J. Fabozzi is Professor of Practice at Johns Hopkins Carey Business School. He has held positions at EDHEC Business School, Yale, Princeton, MIT, NYU, and Carnegie Mellon. He is the author of Entrepreneurial Finance and Accounting for High-Tech Companies and Introduction to Fixed-Income Analysis and Portfolio Management, and coauthor of Bond Markets, Analysis, and Strategies, Tenth Edition and Foundations of Global Financial Markets and Institutions, all published by the MIT Press. His forthcoming coauthored books to be published by MIT Press are The Economics of FinTech and Simulation, Optimization, and Machine Learning for Finance.Michael Imerman
Michael B. Imerman is Assistant Professor of Teaching in the finance area at Paul Merage School of Business at the University of California, Irvine and a consultant for companies ranging from large financial institutions to startups. A former Wall Street analyst and visiting scholar in the FinTech group at the Federal Reserve Bank of San Francisco, he currently serves on the editorial advisory board of the Journal of Financial Data Science.|
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