Exploring the relationship between Fintech and Financial Service Providers in South Africa: an extension of the Duality of Technology Theory

Abstract

Purpose of the Study: The Global Financial Crisis (GFC) of 2008 and the subsequent failure of the established financial system led to a severe lack of trust in Financial Service Providers (FSPs) within economies and the world at large. In developed economies, this subsequently led to the formation of multiple new players in the financial sector who sought out innovative and bespoke solutions to customer pain points, without the need for mediation, intervention, or regulation from the traditional financial system. In developing economies, there are also multiple new players entering the market that are looking to solve very pressing contextual financial and economic issues using new and emerging technologies. Today these players are known as Fintech and they represent an exciting prospect for economic development and innovation. At the same time, they may get mixed reactions from more established FSPs as they are challenging the status quo within financial services. The objective of this paper is to gain a deeper understanding of the relationship between Fintech and established FSPs in the changing competitive financial services landscape in South Africa. Methodology: This research topic uses an interpretivist paradigm along with the Duality of Technology Theory as its core theoretical underpinning. A conceptual framework is proposed, by extending on the Structurational Model of Technology, to illustrate and study the relationship between Fintech and FSPs. An exploratory research design, using a case study strategy, as well as a purposeful sampling method was used to conduct this research. The data collection for this study was conducted within an established financial institution in South Africa, using a semi-structured interview strategy. Findings: The research shows that the concepts originally introduced within the Duality of Technology are still valid in studying technological change within organisations. Concepts like ‘duality’, ‘interpretive flexibility’ and the various modes (design and use) used within the definition of technology by Orlikowski (1992) are still extremely relevant and can be effectively applied to other concepts like ‘innovation’. By extending on the Structurational Model of Technology, the researcher was able to effectively study the change being brought about by Fintech within the financial services industry. The findings from this research show that the formation of newer Fintech firms is forcing the speed of innovation and technological development within established FSPs, along with multiple changes to their ‘institutional properties’ (organisational structures, culture, strategy and norms etc). Change is being driven across the financial services value chain and newer business models are emerging; those that are not already considering their strategy and approach to this market evolution are urged to do so. The market is evolving, and a potential consequence of this evolution is for FSPs and Fintech players to leverage off each other’s products and services through mutually beneficial interactions and relationships. The research findings also show that government and regulators in South Africa are potentially not monitoring the Fintech sector closely enough; balancing the need for economic growth and a stable financial sector should be a key focus for government. Government should be carefully considering how it is going to approach the Fintech sector along with its key players, as if left unregulated for too long it could potentially have disastrous consequences for the economy. Contributions: A major theoretical contribution of this study was to build upon the Structurational Model of Technology to cater for emerging business models. The original framework was extended to include: 1) the ‘external’ environment as a key concept that interacts with all concepts within the ‘internal’ environment; 2) ‘innovation’ as a concept that drives any modern organisation, along with its various interactions within the organisation. The major practical contributions of this paper are that it may help various stakeholders within the financial economy to understand the change being brought about by the introduction of Fintech into the industry. A further practical contribution of this paper is that it lists multiple ways in which an organisation may drive innovation and technology successfully