Bank-Platform Competition in the Credit Market

60 Pages Posted: 7 Sep 2019 Last revised: 11 Sep 2019

See all articles by Sara Biancini

Sara Biancini

University of Cergy-Pontoise

Marianne Verdier

Université Paris 2 Panthéon Assas

Date Written: September 2, 2019

Abstract

The paper analyzes the equilibrium on the credit market when a bank and a platform compete to offer credit to borrowers. The platform does not manage deposit accounts, but acts as an intermediary between the borrower and the investor, offering a risky contract such that the investor is only reimbursed if the borrower is successful. We first characterize the optimal contracts proposed by the platform, depending on the two-sided structure of the market. Then, we study the impact of bank-platform competition on the average risk of bank loans and the relative level of interest rates. We derive the conditions on the lending and the deposit markets such that the bank accomodates platform entry.

Keywords: Bank, Platform, Credit Market, Credit Rationing

JEL Classification: L1, L5, G2

Suggested Citation

Biancini, Sara and Verdier, Marianne, Bank-Platform Competition in the Credit Market (September 2, 2019). Available at SSRN: https://ssrn.com/abstract=3446694 or http://dx.doi.org/10.2139/ssrn.3446694

Sara Biancini

University of Cergy-Pontoise ( email )

33 Boulevard du Port
Cergy-Pontoise Cedex, Cedex 95011
France

Marianne Verdier (Contact Author)

Université Paris 2 Panthéon Assas ( email )

France

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