FinTech Credit and Entrepreneurial Growth

63 Pages Posted: 9 Aug 2021 Last revised: 28 Nov 2022

See all articles by Harald Hau

Harald Hau

University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Yi Huang

Graduate Institute of International and CEPR

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Hongzhe Shan

Swiss Finance Institute, Swiss Finance Institute, Students

Zixia Sheng

New Hope Financial Services

Lai Wei

Lingnan University - Department of Finance and Insurance

Date Written: March 24, 2021

Abstract

Based on automated credit lines to about two million vendors trading on Alibaba’s online retail platform, and a discontinuity in the credit decision algorithm, we document that a vendor’s access to FinTech credit boosts its sales growth, transaction growth, and the level of customer satisfaction gauged by product, service, and consignment ratings. These effects are more pronounced for vendors with (1) sparse credit information; (2) less collateral; (3) higher distribution costs; and (4) weaker debt contract enforceability in local regions, all of which reveal a FinTech advantage over traditional credit technology.

Keywords: FinTech, Big-tech, credit constraints, micro credit, entrepreneurship, service quality, customer satisfaction

JEL Classification: G20, G21, O43

Suggested Citation

Hau, Harald and Huang, Yi and Lin, Chen and Shan, Hongzhe and Sheng, Zixia and Wei, Lai, FinTech Credit and Entrepreneurial Growth (March 24, 2021). Swiss Finance Institute Research Paper No. 21-47, Available at SSRN: https://ssrn.com/abstract=3899863 or http://dx.doi.org/10.2139/ssrn.3899863

Harald Hau

University of Geneva - Geneva Finance Research Institute (GFRI) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, Geneva 1211
Switzerland

Swiss Finance Institute

Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Yi Huang

Graduate Institute of International and CEPR ( email )

PO Box 136
Geneva, CH-1211
Switzerland

Chen Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Hongzhe Shan (Contact Author)

Swiss Finance Institute, Swiss Finance Institute, Students ( email )

c/o University of Geneva
42, Bd du Pont d'Arve
Geneva, CH-1211
Switzerland

Zixia Sheng

New Hope Financial Services ( email )

Lai Wei

Lingnan University - Department of Finance and Insurance ( email )

8 Castle Peak Road
Lingnan University
Hong Kong, New Territories
China

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