Mortgage Lending through a FinTech Web Platform. The Roles of Competition, Diversification, and Automation.

69 Pages Posted: 9 Aug 2019 Last revised: 26 Apr 2023

See all articles by Christoph Basten

Christoph Basten

University of Zurich; Swiss Finance Institute; CESifo (Center for Economic Studies and Ifo Institute)

Steven Ongena

University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: August 9, 2019

Abstract

How do banks offer and price mortgages when an online platform enables them to reach regions where they have no branches? With unique data on responses from many banks to all applying households and a shift-share instrument for market concentration, we find banks to make more and cheaper offers to more concentrated local markets. We rationalize this as investments in lucrative market shares given customer switching costs. Banks also improve their inter-regional portfolio diversification with more attractive offers to regions more complementary to their home locales. Finally, banks` choices become increasingly automated, reducing their operating costs.

Keywords: Mortgage Lending, Spatial Competition, Multi-Product Pricing, Cross-Selling, Switching Costs, Complementary Demand, Bartik Instrument, Shift-Share Instrument, Credit Risk, Diversification, Automation, FinTech

JEL Classification: G2, L1

Suggested Citation

Basten, Christoph and Ongena, Steven R. G., Mortgage Lending through a FinTech Web Platform. The Roles of Competition, Diversification, and Automation. (August 9, 2019). Swiss Finance Institute Research Paper No. 19-39, Available at SSRN: https://ssrn.com/abstract=3434966 or http://dx.doi.org/10.2139/ssrn.3434966

Christoph Basten (Contact Author)

University of Zurich ( email )

Rämistrasse 71
Zürich, CH-8006
Switzerland

Swiss Finance Institute

c/o University of Geneva
40 Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Steven R. G. Ongena

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

NTNU Business School ( email )

Norway

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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