Fintech Is Not the Bank Risk Investors Think It Is

Fintech is often presented as an external force bearing down on traditional banks. Digital wallets can weaken customer relationships, alternative lenders can compete for borrowers, and artificial intelligence can lower the cost of delivering financial services. From that perspective, every advance in financial technology appears capable of unsettling bank valuations.

New research suggests that this explanation is too simple. A study by Selim Güngör, Müge Sağlam Bezgin, and Emine Karaçayır¹ examined banking-sector indices from eight major markets and found that the independent effect of fintech innovation on volatility was generally modest. Much of what looks like fintech risk is actually broader market risk reflected in technology-themed assets.

That distinction changes the question investors should ask. The issue is not simply whether fintech threatens banks. It is whether a bank is exposed to the macroeconomic conditions, international spillovers, and negative shocks that can cause technology and financial shares to move together.

Separating Fintech Risk From Market Risk

Fintech funds and technology indices do not measure innovation in isolation. Their prices also respond to interest rates, economic growth, investor appetite, and movements across the wider technology and financial sectors. A fintech exchange-traded fund may fall during monetary tightening, for example, even if the underlying companies continue releasing useful products.

The researchers attempted to separate these overlapping influences. They studied daily returns from February 12, 2019, through July 31, 2025, covering banking indices in Canada, China, Germany, Italy, Japan, Sweden, the United Kingdom, and the United States. Their innovation proxies represented broad disruptive technology, global fintech, US financial technology, speculative fintech, and AI and robotics.

Before testing their relationship with bank volatility, the researchers removed exposure to common market, technology, financial, interest-rate, and investment-style factors. The remaining movements were then entered with a one-day lag, while the VIX was included as an additional measure of market stress.

This is more than a methodological detail. Common factors explained between 67% and 82% of the daily variation in the innovation proxies. A model that treats every movement in a fintech fund as a fintech-specific event can therefore assign innovation responsibility for volatility that originated elsewhere.

The same principle applies beyond banking. Recent Securities.io research on why crypto markets converge during global crises showed how assets that appear distinct in ordinary conditions can become tightly connected under stress. Labels such as fintech, banking, and digital assets may describe business models, but they do not guarantee independent risk.

What the Banking Data Revealed

After accounting for common exposure, most innovation-related effects were small, statistically insignificant, or dependent on the type of technology proxy and country being examined. Broad disruptive technology was insignificant in seven of the eight banking markets. The US-focused financial technology proxy also added little information beyond what was already present in banking shares.

The exceptions are instructive. Residual movements in a speculative fintech proxy were associated with increased volatility in Germany, the United Kingdom, and the United States. By contrast, the AI and robotics residual was associated with lower volatility in Italy and the United Kingdom. Innovation did not have one universal effect.

The practical message is not that fintech has become irrelevant. Innovation can redirect lending, alter deposit competition, compress fees, and change which institutions control customer relationships. As explored in Securities.io coverage of how digital banking changes access to business credit, its most important effects can occur inside bank operations rather than through dramatic changes in total activity.

The new study instead shows that market prices often absorb those developments through familiar channels. If fintech companies and banks both decline because discount rates rise, calling the resulting bank volatility a direct fintech effect confuses the theme with the cause.

Bad News Matters More Than Good News

The clearest recurring feature was not innovation but asymmetry. In Canada, Germany, Italy, the United Kingdom, and the United States, negative shocks increased volatility more than positive shocks of the same size.

This leverage effect has intuitive foundations. Falling bank shares can intensify concerns about capital strength, asset quality, liquidity, and funding costs. A negative move may therefore generate new questions that a comparable gain does not. Losses can also force portfolio rebalancing, increase hedging activity, and attract closer regulatory attention.

The researchers found that volatility remained highly persistent across every market, with persistence estimates between 0.89 and 0.99. Markets also shifted between relatively calm and turbulent regimes. High-volatility periods aligned with the COVID-19 shock, Russia’s invasion of Ukraine, and the global monetary tightening cycle.

Investors evaluating banking shares should consequently treat market conditions as part of the security itself. A technology announcement released during a calm market does not carry the same pricing implications as similar news released while liquidity is deteriorating or rates are being repriced.

International Diversification Can Fail During Stress

The study estimated total volatility connectedness of 63.1%. In practical terms, nearly two-thirds of the forecast-error variation in the eight-country network came from cross-market spillovers rather than each banking market acting independently.

Most transmission occurred over horizons extending beyond one week. Italy was the largest net transmitter, followed by the United States and Germany. Japan, Sweden, the United Kingdom, and China were net receivers, although China appeared comparatively isolated.

This creates a portfolio problem. An investor can own banks in several countries and still hold a concentrated exposure to the same global volatility network. Geographic diversification may reduce institution-specific risk while offering less protection from shocks passing through the United States and core European markets.

The findings suggest several questions for evaluating bank exposure:

• Is the portfolio diversified by underlying risk or only by geography?
• Which markets are transmitting volatility during the current regime?
• How sensitive are holdings to negative market and rate shocks?
• Does a fintech proxy add information beyond broad technology exposure?

This framework also complements the Bank for International Settlements’ work on the next-generation monetary and financial system. New infrastructure can transform payments and securities markets, but it remains embedded within commercial bank money, central bank reserves, government securities, and regulated financial institutions. Innovation and the existing system are increasingly intertwined rather than cleanly opposed.

Investing in a Technology-Driven Banking Incumbent

JPMorgan Chase

For investors seeking exposure to a bank developing financial technology at institutional scale, JPMorgan Chase offers a relevant example. The company sits within the US banking system, which the study identified as one of the principal net transmitters of volatility, while operating technology infrastructure that spans payments, cybersecurity, data analysis, AI, and machine learning.

JPMorgan states that it moves $12 trillion in payments each day and invests approximately $19.8 billion annually in technology. Its technology operations include applied research, a machine learning center, and AI research focused on finance. This scale makes technology an operating capability rather than a narrow product category.

The investment case still cannot be reduced to technology spending. The research indicates that macroeconomic exposure, international connectedness, and downside asymmetry can dominate the volatility associated with innovation itself. JPMorgan may use AI and digital infrastructure to improve efficiency, security, and customer service, but its shares remain exposed to credit cycles, rates, regulation, market activity, and stress spreading through the financial system.

That combination makes it a useful illustration of the study’s central insight. Banks are not merely passive incumbents threatened by fintech. Large institutions can be technology developers, infrastructure operators, and systemic market nodes at the same time.

Fintech Risk Needs a Better Definition

The study does not prove that financial innovation is harmless. Its proxies reflect publicly traded themes and investor sentiment rather than direct measures such as patents, product launches, software adoption, or regulatory approvals. The analysis is associational, and the final published paper may receive additional copyediting because the examined document is a journal pre-proof.

Its contribution is nevertheless important. Investors often begin with a compelling narrative and then search for market data that appears to confirm it. By removing the broad exposures embedded in fintech indices, the researchers tested whether innovation still carried a distinct signal. Usually, little remained.

The better conclusion is that fintech changes banking through competition, infrastructure, and operating models, while bank-stock volatility travels mainly through broader financial channels. Investors who distinguish those two processes can evaluate disruptive technology without mistaking every market-wide selloff for evidence that fintech is destabilizing the banking system.

References:

¹ Güngör, S., Sağlam Bezgin, M., & Karaçayır, E. (2026). FinTech innovation, disruptive technology, and bank stock volatility: Regime-dependent and asymmetric evidence from major national banking-sector indices. Borsa Istanbul Review. https://doi.org/10.1016/j.bir.2026.100910