Negative Externalities of The Digital Transformation in The Financial Sector


  • Pablo Alonso-Rodríguez


Fintech, competition, discrimination, consumer protection


The digital transformation of the financial sector is an unstoppable global phenomenon. Numerous reports focus on highlighting the benefits that this entails, generally ignoring the negative externalities associated with this transformation and the risks that its lack of control could unleash. This paper aims at focusing on these negative externalities following a multidisciplinary approach and provides an overview of  the existing practices worldwide. It highlights the main concerns that must be faced in the following main areas or research: (i) unemployment in the financial sector derived from the adoption of technology and increased competitive pressures; (ii) risks to financial stability as a result of the lack of regulation of the activities carried out by new entrants to the financial industry and the competitive response of pre-existing players; (iii) consumer protection and increased risk of unwanted access to sensitive data; and (iv) risk of use for money laundering purposes.

The paper raises the need to respond to identified areas of research in a coordinated manner. Moreover, it notes that the new forms of action and the new actors that have recently entered the financial industry must be subject to the same regulation as banks, insurers and other incumbents if they carry out similar activities. Traditional players must know how to adapt to the new competitive environment without endangering their financial soundness and preserving the financial stability. Finally, legislators, regulatory agencies and supervisors must be aware of the new risks that the digital transformation of the financial sector brings with it and amend the applicable regulation and supervisory practices accordingly.


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Author Biography

Pablo Alonso-Rodríguez

Faculty of Economics, Universidad Nacional de Educación a Distancia (UNED)

Madrid, Spain