Chapter 3.1: European Banks and Financial Technologies: The Role of the Board Composition

The European banking sector has reached a tipping point, experiencing unprecedented changes. The disruptive power of financial technologies has posed a significant threat to banks’ competitiveness, profitability, and survival. The stricter post-crisis regulatory requirements have implied an asymmetric regulation and costs between traditional banks, on the one hand, and fintech firms and big tech, on the other. The Coronavirus pandemic has also forced literacy for consumers who will increasingly demand innovative digital products. To keep pace, improve their profitability and survive, banks need to innovate their way of doing business, embrace emerging technology, and put customers at the centre of every strategy. One main lever could be the board of directors and its composition. Thus, this study investigates the relationship between banks’ boards’ compositions and their migration towards fintech characteristics. The study was conducted on 50 European banks classified as “significant institutions” over six years (2014-2019), using a hand-collected dataset for governance variables, drawing on the resource dependence theory and the upper echelons theory. Evidence shows a positive and significant influence on the banks’ migration exerted by the board size, the directors’ average age, the percentage of directors with a PhD in EIT or economics and finance disciplines, or previous work experiences in the EIT sector/position. This study contributes to the existing board diversity and composition literature, shedding new light on banking governance. It also aims to offer insights to regulators, policymakers, and practitioners requiring more digital know-how, competencies, and experiences in the banks’ boardroom.