Download This PaperWhen FinTech Competes for Payment Flows
64 Pages Posted: 24 Mar 2020 Last revised: 2 Nov 2021
Date Written: November 2, 2020
Abstract
We study the impact of FinTech competition in payment services when a bank uses payment data to learn about consumers' credit quality. Competition from FinTech payment providers disrupts this information spillover. The bank’s price for payment services and its loan offers are affected. FinTech competition promotes financial inclusion, may hurt consumers with a strong bank preference, and has an ambiguous effect on the loan market. Both FinTech data sales and consumer data portability increase bank lending, but the effects on consumer welfare are ambiguous. Under mild conditions, consumer welfare is higher under data sales than with data portability.
Keywords: FinTech, BigTech, payment, competition, banks, credit market
JEL Classification: D43, G21, G23, G28
Suggested Citation: Suggested Citation
Uday Rajan
Stephen M. Ross School of Business, University of Michigan ( email )
701 Tappan Street
Ann Arbor, MI 48109
United States
734-764-2310 (Phone)
HOME PAGE: http://webuser.bus.umich.edu/urajan
Haoxiang Zhu (Contact Author)
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
100 Main Street E62-623
Cambridge, MA 02142
United States
HOME PAGE: http://www.mit.edu/~zhuh