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

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
2,197
Abstract Views
6,143
Rank
12,982
PlumX Metrics