It Quacks Like a Duck: A Comparative Analysis of Fintech Companies and Traditional Banks

• In Event: 40860 - Section on Economic Sociology Roundtables
  In Refereed Roundtable (60 minute): Table 10. Innovation and entrepreneurship

Abstract

This paper examines how fintech companies and traditional banks package and communicate financial risks in the digital finance era. The 2008 financial crisis exposed the risky behaviors of traditional banks, leading to growing distrust and the rapid rise of fintech firms. These companies offer banking-like services without being chartered financial institutions and use regulatory loopholes to position themselves as intermediaries between consumers and commercial banks. Despite promising high returns and financial security, fintech firms often obscure financial risks, prompting the question of how they package such risks compared to traditional banks. Referencing theories of institutional isomorphism, the sociology of risk, and political economy, my research explores fintech firms' strategies in mimicking traditional banks while using the rhetoric of financial freedom and inclusivity to build consumer trust. Traditional banks historically relied on expert-driven legitimacy, while fintech firms emphasize financial empowerment, inclusion, and entrepreneurial narratives. Additionally, fintech firms utilize gamification in mobile applications to obscure financial risks, creating a dissociation between financial decision-makers and consumers. I employ content and discourse analysis of earnings calls, annual reports, advertisements, and mobile interfaces from major fintech firms and banks (2010–2023). Preliminary findings suggest fintech firms replicate traditional risk obfuscation strategies but with a stronger emphasis on technology and consumer agency. The study contributes to discussions on financialization, institutional isomorphism, and the evolving relationship between financial institutions and consumers, as well as unpacking the ongoing transformation of risk communication in digital finance.

Author

• Zhen Wang, University of Toronto