NEW YORK – Innovative financial technologies have grown rapidly in the last five years, including commission-free investing apps like Robinhood and cryptocurrencies like Bitcoin. In any industry, the emergence of technology that offers enhanced efficiency can displace human labor. Companies and jobseekers alike remain unsure of how fintech will disrupt established financial institutions’ outcomes and threaten the number of jobs available for finance employees. In new research, Columbia Business School Professor Wei Jiang, the Arthur F. Burns Professor of Free and Competitive Enterprise, analyzes fintech disruption and finds that it has significantly reduced the demand for jobs overall. However, this bad news for employees does not spell trouble for shareholders, whose companies remain largely unharmed by the fintech disruption.

To the detriment of jobseekers, companies who had folded fintech into their work more frequently displayed significantly lower labor force growth than other companies. Specifically, demand for intermediate-level positions shrank the most and traditional financial hubs like New York City, San Francisco, and Chicago lost the most fintech jobs to new tech hubs in North Carolina and Texas. In the face of these losses for jobseekers, businesses have not suffered from the so-called fintech disruption. In fact, sales growth, return on assets (ROA), and research and development (R&D) investment remained steady. Despite this tradeoff between employees and companies, Professor Jiang and her colleagues discovered a win-win situation for both jobseekers and businesses who pioneered their own fintech innovations. These businesses both hired more employees whilst also enjoying higher sales growth, ROA, and R&D investments than companies who had merely integrated fintech into their work. Therefore, job candidates found more opportunities at fintech-inventor companies than at fintech-adopter companies.

“Technological advancement in any industry is enough to make employees and companies uneasy about what the future holds,” said Professor Wei Jiang. “But, companies can find comfort in that the so-called fintech disruption hasn’t impacted their outcomes. Employees, on the other hand, should be looking towards fintech innovators themselves, rather than fintech adopters, as they explore new jobs in the field of finance.”

Professor Jiang and co-authors University of Florida Associate Professor Yuehua Tang, Georgia State University Professor Vincent Yao, and Georgia State University PhD Candidate Rachel (Jiqiu) Xiao assessed the relationship between fintech and demand for jobs by cross-analyzing the text in over 40,000 job task descriptions and fintech patent filings from 2003 to 2017 to measure similarity. Looking at employment levels alone does not reveal much movement in the labor force. However, a review of the U.S. Department of Labor official job listings reveals how fintech is reshaping expectations for job candidates. The study is also unique in its focus on patent filings, which enabled the researchers to identify the select group of new fintech innovations that companies are adopting or developing. The extent of textual overlap between companies’ job descriptions and fintech patent filings thus demonstrates the extent to which companies had integrated fintech into its practices.

Key Findings:

• Companies that created new fintech innovations – including cybersecurity, mobile transactions, data analytics, blockchain peer-to-peer (P2P) computing, robo-advising, and internet of things (IoT) technologies – offered more opportunities for jobseekers and experienced increased sales growth, ROA, and R&D investments.
• The most fintech-integrated companies experienced the least amount of employment growth than those who had adopted fintech technologies to a lesser extent.
• Demand for intermediate-level positions decreased the most, and fintech jobs shifted from being concentrated in CA, NY, and IL to newer tech hubs NC and TX.
• The fintech disruption did not harm companies’ outcomes, their sales growth, ROA, and R&D investments did not decrease as the result of new fintech technologies.

This research provides some much-needed answers for companies and jobseekers who are concerned about how the rapid growth of fintech will impact their future success. While shareholders and companies need not worry about their outcomes, job candidates will have better luck finding steady employment with companies who are driving new fintech inventions rather than those that are merely adopting them.

You can read the full study, Surviving the Fintech Disruption, here.

To learn more about the cutting-edge research being conducted at Columbia Business School, please visit gsb.columbia.edu.  

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