Abstract:

This study aims to investigate if the emergence of fintech startups gives disruption for incumbent firms. The disruption is in the form of loan distribution and profits gained by incumbent firms’ business. This study is a pioneer study investigating the impact of fintech startups on incumbent firms’ performance. Incumbent firms involved in this study are rural bank, commercial bank, and multi-finance institutions which principally run peer-to-peer lending business. Loan distribution was assessed by employing net loan to assets while profit was assessed by employing return on assets. This study was conducted in Indonesia by involving all incumbent firms registered in Indonesia Stock Exchange and Financial Service Authority. This study employed paired sample t-test to examine if net loans to assets and return on assets received differences before and after fintech startup emerged. The study reveals that fintech startup disrupts incumbent firms’ business because incumbent firms’ total of net loans to assets and total of return on assets decrease. However, this condition only occurs in rural bank and multi-finance institutions. Business threat of fintech startup does not occur in commercial bank.