Can FinTech Reduce Disparities in Access to Finance? Evidence from the Paycheck Protection Program

New technology promises to expand the supply of financial services to small businesses poorly served by banks. Does it succeed? We study the response of FinTech to financial services demand created by the introduction of the Paycheck Protection Program. Fin-Tech is disproportionately used in ZIP codes with fewer bank branches, lower incomes, and more minority households, and in industries with fewer banking relationships. It is also greater in counties where the economic effects of the COVID-19 pandemic were more severe. Substitution between FinTech and banks is economically small, implying that FinTech mostly expands, rather than redistributes, the supply of financial services.

Keywords: Financial Technology, Coronavirus, Recession, Nonbank, Online Bank, Loan, Credit, Subsidy

JEL Classification: E6, G21, G23, G28, G38, H25, H32, I38

Suggested Citation: Suggested Citation

Erel, Isil and Liebersohn, Jack, Can FinTech Reduce Disparities in Access to Finance? Evidence from the Paycheck Protection Program (September 30, 2021). Fisher College of Business Working Paper No. 2020-03-016, Charles A. Dice Working Paper 2020-16, Available at SSRN: https://ssrn.com/abstract=3650510 or http://dx.doi.org/10.2139/ssrn.3650510