What is Fueling FinTech Lending? The Role of Banking Market Structure

88 Pages Posted: 16 Jul 2020 Last revised: 29 Jun 2022

See all articles by Tetyana Balyuk

Tetyana Balyuk

Emory University - Goizueta Business School

Allen N. Berger

University of South Carolina - Darla Moore School of Business

John Hackney

University of South Carolina - Department of Finance

Date Written: June 27, 2022

Abstract

We study how the presence of incumbents employing different technologies affects FinTech penetration using small business lending as a laboratory. We find more FinTech market penetration where large and out-of-market banks are more prevalent. Using stress test exposures and CRA examinations as instruments, we further find FinTech credit more often substitutes for loans by large/out-of-market banks than small/in-market banks. Results are consistent with FinTech advantages in processing hard information, rather than hardening soft information. FinTech loans become somewhat safer after replacing bank loans, counter to cream-skimming arguments. We finally find that FinTech and bank lending both yield real economic benefits.

Keywords: FinTech, in-market banks, large banks, lending technologies, out-of-market banks, small banks, small business lending

JEL Classification: G21, G23, O33

Suggested Citation

Balyuk, Tetyana and Berger, Allen N. and Hackney, John, What is Fueling FinTech Lending? The Role of Banking Market Structure (June 27, 2022). Available at SSRN: https://ssrn.com/abstract=3633907 or http://dx.doi.org/10.2139/ssrn.3633907

Tetyana Balyuk (Contact Author)

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States

Allen N. Berger

University of South Carolina - Darla Moore School of Business ( email )

1014 Greene St.
Columbia, SC 29208
United States
803-576-8440 (Phone)
803-777-6876 (Fax)

John Hackney

University of South Carolina - Department of Finance ( email )

1014 Greene Street
Columbia, SC 29208
United States

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