Open Banking: Credit Market Competition When Borrowers Own the Data

58 Pages Posted: 23 Jan 2021

See all articles by Zhiguo He

Zhiguo He

University of Chicago - Finance

Jing Huang

Texas A&M University

Jidong Zhou

Yale School of Management

Multiple version iconThere are 3 versions of this paper

Date Written: November 13, 2020


Open banking facilitates data sharing consented by customers who generate the data, with a regulatory goal of promoting competition between traditional banks and challenger fintech entrants. We study lending market competition when sharing banks' customer data enables better borrower screening or targeting by fintech lenders. Open banking could make the entire financial industry better off yet leave all borrowers worse off, even if borrowers could choose whether to share their data. We highlight the importance of equilibrium credit quality inference from borrowers' endogenous sign-up decisions. When data sharing triggers privacy concerns by facilitating exploitative targeted loans, the equilibrium sign-up population can grow with the degree of privacy concerns.

Keywords: Open Banking, Data Sharing, Banking Competition, Digital Economy, Winner’s Curse, Privacy, Precision Marketing

JEL Classification: D18, G21, L13, L51

Suggested Citation

He, Zhiguo and Huang, Jing and Zhou, Jidong, Open Banking: Credit Market Competition When Borrowers Own the Data (November 13, 2020). Available at SSRN: or

Zhiguo He (Contact Author)

University of Chicago - Finance ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

HOME PAGE: http://

Jing Huang

Texas A&M University ( email )

Jidong Zhou

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

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