Falling for FinTech? A historical institutionalist account of France’s post-crisis approach to financial innovation

Papiasse, Daphnée (2023) Falling for FinTech? A historical institutionalist account of France’s post-crisis approach to financial innovation. PhD thesis, London School of Economics and Political Science.

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Abstract

FinTech- the recent wave of technological innovation in finance – is no longer a buzzword but a mainstream development in financial services. Although it raises much hope, Fintech creates challenges to post-global financial crisis regulation which raises an important research question at the heart of this thesis: How do financial regulators manage uncertain technological innovations in the wake of a protracted systemic crisis? This thesis analyzes this critical question for political economy and public policy through a qualitative in-depth analysis of FinTech regulation in France, a country where the State has promoted financial innovation as a matter of industrial policy within an evolving regulatory space, supported generally by market-shaping principles. Faced with FinTech challengers, popular political economy explanations of post-crisis financial regulatory reform – regulatory capture and structural power theories - would respectively predict that the French state is likely to be subverted to FinTech interests or defer to the preferences of champion incumbent banks. Drawing on data collected from 63 elite interviews, this thesis finds the opposite. Through my case studies of early regulatory developments on FinTech - crowdfunding, innovation hubs, and crypto assets- I find that the French state progressively eased FinTech challengers into the regulatory fold without fundamentally revoking core financial regulatory objectives and strategies. Building on a historical institutionalist approach, that emphasizes incremental over punctuated change, I explain France’s puzzling approach as a continuation of state-led financial development but with a twist. Following the crisis, the breakdown of the banking system and the subsequent credit crunch triggered a protracted policy rethink on financial innovation and competition in French finance. Largely decoupled from the EU’s relatively slow-paced and risk averse position as well as the broader international deregulatory discourse on FinTech, this thesis argues that the French State, driven by a pro-active administration-politics nexus, instrumentalizes FinTech for a new domestic and EU agenda for industrial policy which seeks to facilitate small challengers to foster greater competition in financial services. France’s progressive facilitation of FinTech has comparative value and relevance beyond the strict confines of France: if even the French state is incrementally reconfiguring through its state-bureaucratic nexus the state-finance nexus through a strategic coupling of traditional finance with FinTech then we might expect other countries to undergo similar developments. The case of France hence shows that state agency is not uprooted in the face of uncertain innovative developments but strategically redeployed in innovative ways to foster greater competition in developed and highly regulated financial services. However, through the study of domestic crypto asset regulation, this thesis equally warns against the hubris of states who push for radical changes that attempt to command incumbent banks to partake in state-led facilitation of FinTech.

Item Type:	Thesis (PhD)
Additional Information:	© 2023 Daphnée Papiasse
Library of Congress subject classification:	H Social Sciences > HG Finance H Social Sciences > HJ Public Finance T Technology > T Technology (General)
Sets:	Departments > European Institute
Supervisor:	Lodge, Martin and Schelkle, Waltraud
URI:	http://etheses.lse.ac.uk/id/eprint/4597

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