When FinTech Competes for Payment Flows

64 Pages Posted: 24 Mar 2020 Last revised: 2 Nov 2021

See all articles by Christine A. Parlour

Christine A. Parlour

University of California, Berkeley - Finance Group

Uday Rajan

Stephen M. Ross School of Business, University of Michigan

Haoxiang Zhu

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

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

Parlour, Christine A. and Rajan, Uday and Zhu, Haoxiang, When FinTech Competes for Payment Flows (November 2, 2020). Available at SSRN: https://ssrn.com/abstract=3544981 or http://dx.doi.org/10.2139/ssrn.3544981

Christine A. Parlour

University of California, Berkeley - Finance Group ( email )

Haas School of Business
545 Student Services Building
Berkeley, CA 94720
United States
510-643-9391 (Phone)

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

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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