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Efficiency measurement of fintech companies: a two-stage DEA approach

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Abstract

FinTechs have gained an important place in the financial sector with their dynamic and customer-oriented structures and innovative approaches and business models. In recent years, the competition between actors in the financial sector has intensified. In a rapidly developing sector, where competition is intense and challenging, efficiency is a very important performance indicator for fintechs. This study aims to measure and examine the efficiency performance of FinTech companies. Data Envelopment Analysis was used for efficiency measurement. By establishing a two-stage data envelopment analysis model, "profitability", "marketability" and "overall process" efficiencies of fintechs were measured and analyzed. Efficiency of FinTechs operating in eight different sub-sectors was measured for the period of 2010–2019. The results show that, fintechs’ profitability efficiency performances are higher than their marketability efficiency performances. Besides, efficiency performance of the fintech companies differs on the basis of sub-sectors. This paper is a pioneer study in efficiency measurement of FinTechs.

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Data availability

The datasets used and/or analyzed during the current study were gathered from Thomson Reuters Refinitiv Eikon repository, https://eikon.thomsonreuters.com/index.html. The datasets can be found in many different sources and databases and are available from the corresponding author on reasonable request.

Code availability

Data envelopment analysis was performed using DEAFrontier software (http://www.deafrontier.net/deasoftware.html).

Notes

  1. When KBW first introduced the Financial Technology Index, it presented the sub-sector distinction for the companies included in the index but did not publish this information in the following periods. The sub-sector distinction of the companies included in the index was obtained by making contact with the officials of the KBW Company for all periods including 2019.

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Acknowledgements

This study is a part of Mehmet Çağlar’s Ph.D. dissertation.

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  1. Department of Business Administration, Yildiz Technical University, 34220, Istanbul, Turkey

    Mehmet Çağlar

  2. Department of Business Administration, İstanbul University, 34322, Istanbul, Turkey

    Seyhan Nişel

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  1. Mehmet Çağlar
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Çağlar, M., Nişel, S. Efficiency measurement of fintech companies: a two-stage DEA approach. Electron Commer Res (2024). https://doi.org/10.1007/s10660-023-09804-3

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