International Journal of Banking, Finance and Insurance Technologies

An Empirical Analysis of Bank Efficiency in Gambia

Yildirim HS — 2021-10-29

This study evaluates the Technical Efficiency (TE), Pure Technical Efficiency (PTE) and Scale Efficiency (SE) of commercial banks in the Gambian banking sector. In the first stage, a non-parametric approach (DEA) is used to evaluate the relative efficiency of 12 banks from 2009 to 2017 based on “the production approach” of modeling bank efficiency. In the second stage the relationship between certain bank-specific and environmental variables and efficiency scores are examined by employing the Tobit regression model.

The empirical analyses from the first stage reveals that about 42% of commercial banks were CRS technically efficient and 83% of them were VRS technically efficient in 2017. Only 42% of the banks were at the optimal size for their particular input–output mix, the remaining eight banks were scale inefficient. The level of overall technical efficiency of commercial banks in the Gambia accounted 86.5% in terms of TE, 93.1% in terms of PTE and 92.5% in terms of SE. The second stage analyses reveal that banks with the ability to charge lower interest on deposits and maintain higher interest rates on loans attain higher efficiency scores. Further, banks with large market share and market power in pricing their products can improve their efficiency levels. Lower liquidity risk is associated with higher efficiency scores. There is a weak evidence of negative association with bank size and efficiency, suggesting that smaller banks may obtain operational advantages that bring about higher efficiencies

Financial Market Efficiency: Equity versus Cryptocurrency before and after Covid-19 Pandemic

Voon Jan Piaw Thomas — 2021-10-29

The Covid-19 pandemic outbreak may generate differential impacts on global financial markets causing some markets to be more efficient than the others. This paper employs Hurst Exponent as a methodology for measuring financial market efficiency. The literature focused largely on the equity markets such as the stock markets. There is a paucity of studies on the evolving cryptocurrency markets such as Bitcoins. There is also a paucity of studies examining how asset market efficiencies are influenced by the pandemic. We therefore develop testable efficiency market hypotheses for both equities and cryptocurrencies against the backdrop of a large scale global pandemic. We also develop a new theoretical concept in addition to those in the literature for explaining our empirical findings. Our results show that the efficiency level of the cryptocurrency markets is lower than the stock markets. Furthermore, the efficiency level of both the cryptocurrency markets and stock markets decline after the onset of the covid-19 pandemic. The theoretical framework developed in this paper can be used to provide relevant explanations for our empirical results.

Road safety for fleets of vehicles

Georges Dionne — 2021-10-29

Road safety for fleets of vehicles has been neglected in the insurance literature, mainly because appropriate data and methodology were not available. This article makes a threefold contribution: 1) Produce statistics on current fleets’ road safety offences and accidents using a panel of 20 years of data on truck fleets; 2) relate fleets’ offences to accidents; and 3) identify and classify the riskiest fleets for insurance ratemaking based on past experience in managing road safety. Our main technical innovation to the insurance literature is in the estimation of fleets’ distributions of accidents. For each fleet size (or group of sizes), we estimate the parameters of the negative binomial (NB) distribution of the annual number of accidents according to the characteristics of the fleets, the years, and the number of driver (DRV) and carrier (CAR) road safety violations accumulated in the previous year. When the NB model does not accurately predict the mathematical expectation of the number of accidents of larger fleets, we proceed in two steps. First, we estimate the probability of having zero accidents in a year, and then estimate the negative binomial distribution using the estimated probability of having zero accidents, to weight the zeros of each fleet. To achieve our third objective, we construct risk classes for the vehicle fleets using the predicted accident probabilities obtained from the estimated models. Our results show a substantial heterogeneity between fleets in terms of road safety. This information should be very useful for optimal insurance pricing and better incentives for road safety.

Preventing Consumers to Spin: Are Upgraded Macroprudential Measures Needed?

Olivier Mesly — 2021-10-29

In this provocative, exploratory article, we enrich the emerging concept of consumer financial spinning by first analyzing the US market at the time of the Global Financial Crisis, when it was filled with avid, sometimes naïve mortgage buyers, to outline the phenomenon of consumers becoming desensitized to risk, but remaining responsive to marketing “sweetheart deals” (sweeteners) aimed at luring them into buying houses repeatedly. They thus enter into a vicious circle of debt. In line with the data percolation methodology, which recommends looking at a new phenomenon from contrasting analytical angles, we then conduct a virtual reality test to see if we can artificially induce such behavior. Based on our bi-angle results, we highlight the role of questionable marketing and legal practices that entice consumer spinning, thus calling for macroprudential measures, given that past and current regulations have missed the opportunity to fully protect consumers in this regard.

FinTech Innovation: Review and Future Research Directions

Robin Jarvis — 2021-10-29

This paper aims to survey the most recent theoretical and empirical literature on FinTech innovations in the financial sector. The purpose of this review is to investigate how FinTech Innovations are altering and reshaping the universe of financial service providers, and challenging traditional business models and infrastructures. This study summarizes the opportunities and challenges of FinTech Innovations and the implications to the legacy incumbent financial services companies. FinTech innovation fusions technological capabilities potentially provide innovative financial products and services to foster financial inclusion, streamline processes, and lower costs to clients. FinTech can bring greater competition and diversity in financial services. Further, this research interprets the findings from the lens of institutional theory to advance the theoretical understanding of social changes facilitated by FinTech innovations in revolutionary areas in banking (lending, payment), security trading (real-time settlement, automated investment), and insurance (personalized experience). The investigation points out the regulatory concerns highlighted in the scholarly works, suggesting collaboration is critical to enable multi-stakeholders to anticipate and foster pro-innovative, transparent regulations to deliver meaningful benefits to innovation and financial inclusion. Lastly, this review identifies future research areas to further enrich knowledge to create a future-proof, more efficient, and resilient financial ecosystem to enhance financial stability in the digital era.