Lender Automation and Racial Disparities in Credit Access

92 Pages Posted: 11 Oct 2021 Last revised: 21 Nov 2022

See all articles by Sabrina T Howell

Sabrina T Howell

New York University (NYU) - Leonard N. Stern School of Business; National Bureau of Economic Research (NBER)

Theresa Kuchler

New York University (NYU)

David Snitkof

Ocrolus

Johannes Stroebel

New York University (NYU) - Leonard N. Stern School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Jun Wong

New York University (NYU)

Date Written: November 11, 2022

Abstract

Process automation reduces racial disparities in credit access through enabling smaller loans, broadening banks’ geographic reach, and removing human biases from decision-making. We document these findings in the context of the Paycheck Protection Program (PPP), a setting where private lenders faced no credit risk but decided which firms to serve. Black-owned firms primarily obtained PPP loans from automated fintech lenders, especially in areas with high racial animus. After traditional banks automated their loan processing procedures, their PPP lending to Black-owned firms increased. Our findings cannot be fully explained by racial differences in loan application behaviors, pre-existing banking relationships, firm performance, or fraud rates.

Keywords: Fintech, Automation, Small business loans, racial discrimination, PPP

JEL Classification: G21, G23, G28, G41, J15

Suggested Citation

Howell, Sabrina T and Kuchler, Theresa and Snitkof, David and Stroebel, Johannes and Wong, Jun, Lender Automation and Racial Disparities in Credit Access (November 11, 2022). Available at SSRN: https://ssrn.com/abstract=3939384 or http://dx.doi.org/10.2139/ssrn.3939384

Sabrina T Howell (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States
212-998-0913 (Phone)

HOME PAGE: http://www.sabrina-howell.com

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Theresa Kuchler

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

David Snitkof

Ocrolus ( email )

101 Greenwich St
New York, NY 10006
United States

Johannes Stroebel

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Jun Wong

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1,432
Abstract Views
12,684
rank
20,082
PlumX Metrics