University at Buffalo School of Management

Spring 2018 Buffalo Business 21 Traditional banks can take days or weeks to approve a loan request. But finan- cial technology (fintech) companies oen grant personal, unsecured loans in seconds — and that speed is taking business away from small, regional banks, according to re- search by Brian Wolfe, assistant professor of finance. This fall, Wolfe and his co-author, Woongsun Yoo, assistant professor of fi- nance at Saginaw Valley State University, presented their findings at the Federal Deposit Insurance Corp.'s (FDIC) highly competitive bank research conference and at the Toronto Fintech Conference at Ivey Business School. Their study — the first to examine the effect fintech companies have on banks' loan volume — showed that for every dol- lar fintech platforms gave in personal, un- secured loans, more than 25 cents came out of a small bank's portfolio. Meanwhile, na- tional banks were unaffected. Fintech companies allow individual investors to fund loans and, in some cases, even give small banks access to come on as investors through their platforms, signifi- cantly diluting the negative effect on those banks' portfolios. "Clearly, fintech companies are chang- ing the banking landscape — and this is just the beginning," Wolfe says. "Our results could mirror how things will unfold for other segments, like mortgages." For Wolfe, presenting at the FDIC was a thrill many years in the making. "You learn about the FDIC all through school, even back in high school history class," he says. "It was nerve-wracking, but exciting, to present a topic we're passionate about for people who care and could be af- fected by our work." x Wolfe presents fintech research at fdic For grocery retailers, the tried-and- true strategy of deep discount promotions is a successful one, according to a new study from the School of Management. Published in the Journal of Retailing, the study found that significantly marking down prices on items at supermarkets does bring more people into stores, and increas- es profits and sales — especially when the items are the kind most people buy, such as milk and eggs. In addition, promotions of name-brand items are more effective than those of generic or store-brand items. "Deep discount promotions have con- tinued to be popular, despite the lack of research evidence about their impact," says study co-author Debabrata Talukdar, professor of marketing. "Most studies ana- lyzed how price promotions affected a par- ticular brand or product category, but we looked at how these discounts impacted the amount of traffic to the store, amount of sales per transaction and overall profit margin." The authors analyzed transaction data from 55 weeks across 27 product categories in 24 stores of a large regional U.S. super- market chain. They supplemented transac- tion data with information from the stores' weekly flyers and advertising, as well as those of their competitors. Talukdar warns that while these promotions work, grocers shouldn't go overboard, particularly within the same category of items. "Discounting more items in a catego- ry actually leads to lower store margins," says Talukdar. "This suggests that the costs of the discounts is not offset by the profits generated from the sale." In addition, the study authors recom- mend restricting deep discounts to items that aren't frequently put on sale by nearby competitors. "Retailers run the risk of entering into a destructive, prisoner's dilemma type of price war if they promote the same items in the same weeks," says Talukdar. Talukdar collaborated on the study with lead author Dinesh Gauri, professor and Walmart Chair in Marketing, University of Arkansas Sam M. Walton College of Business; Joseph Pancras, associate professor of mar- keting, University of Connecticut School of Business; and Brian Ratchford, Charles and Nancy Davidson Chair in Marketing, University of Texas at Dallas Javeen Jindal School of Management. x deep discounts work for supermarkets Talukdar Photo: Douglas Levere

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