Banking and Credit Market Competition with AI and Cryptocurrencies

66 Pages Posted: 4 Jun 2021 Last revised: 21 Jul 2022

See all articles by John E. Thanassoulis

John E. Thanassoulis

University of Warwick - Warwick Business School; UK Competition and Markets Authority; Oxford-Man Institute, University of Oxford

Tamas Vadasz

KU Leuven - Faculty of Economics and Business

Date Written: July 12, 2022

Abstract

We study the impact of AI and cryptocurrencies on consumer surplus in banking, on the price of credit, and on the price of checking accounts. We solve a competition model of banking and credit which includes client naivety, heterogeneous client risk, and imperfect risk screening. These features, together, can explain the international pattern of banking costs. In countries where free accounts are prevalent (eg US/UK) both better AI and more crypto use lower consumer surplus, while reducing the amount of naivety improves consumer surplus. Where free-banking is not prevalent (e.g. France/Germany), only one of these three results holds.

Keywords: Overdrafts, Customer naivety, Retail Banking, AI, Cryptocurrencies

JEL Classification: G10, G21, G40

Suggested Citation

Thanassoulis, John E. and Vadasz, Tamas, Banking and Credit Market Competition with AI and Cryptocurrencies (July 12, 2022). Available at SSRN: https://ssrn.com/abstract=3859667 or http://dx.doi.org/10.2139/ssrn.3859667

John E. Thanassoulis

University of Warwick - Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom

HOME PAGE: http://https://sites.google.com/site/thanassoulis/

UK Competition and Markets Authority ( email )

Victoria House
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London, WC1B 4AD
United Kingdom

Oxford-Man Institute, University of Oxford ( email )

Eagle House
Walton Well Road
Oxford, Oxfordshire OX2 6ED
United Kingdom

Tamas Vadasz (Contact Author)

KU Leuven - Faculty of Economics and Business ( email )

Korte Nieuwstraat 33
2000 Antwerpen
Belgium

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