Shadow Banking in a Crisis: Evidence from FinTech During COVID-19
Journal of Financial and Quantitative Analysis, Forthcoming
58 Pages Posted: 23 Nov 2020 Last revised: 5 Oct 2021
Date Written: November 21, 2020
We analyze lending by traditional as well as FinTech lenders during COVID-19. Comparing samples of FinTech and bank loan records across the outbreak, we find that FinTech companies are more likely to expand credit access to new and financially constrained borrowers after the start of the pandemic. However, this increased credit provision may not be sustainable; the delinquency rate of FinTech loans triples after the outbreak, but there is no significant change in the delinquency of bank loans. Borrowers holding both loan types prioritize the payment of bank loans. These results shed light on the benefits provided by shadow banking in a crisis and hint at the potential fragility of such institutions when delinquency rates spike.
Keywords: COVID-19, Credit Card, FinTech, Credit Provision, Delinquency
JEL Classification: D90, G21, I18, O16
Suggested Citation: Suggested Citation