Preprint
Fintech vs. Bank: The Impact of Lending Technology on Credit Market Competition
Social Science Research Network : SSRN
2023
Abstract
Does the recent proliferation of technology in lending process have an impact on business loan market competition? Using a theoretical model that assumes heterogeneity in lenders’ screening ability and borrowers’ investment horizon, we show that FinTech (Traditional) lenders primarily supply unsecured (asset-backed) loans to borrowers with short-term (long-term) projects. The model builds on the interplay between screening ability and collateral requirements to characterize the competition between two ex-ante symmetric lenders. Lenders use screening technology and collateral requirements to mitigate competition and restrict the supply of credit through an endogenous segmentation of markets with different maturities. As information technology improves, the effect on credit supply and equilibrium interest rates is more nuanced and depends on the maturity of the market. The results offer a supply-side explanation for the growth of unsecured lending
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Details
- Title
- Fintech vs. Bank
- Creators
- Konstantinos SerfesKejia WuPanagiotis Avramidis
- Publication Details
- Social Science Research Network : SSRN
- Publisher
- SSRN
- Number of pages
- 34 pages
- Resource Type
- Preprint
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Other Identifier
- 991021867160304721