Lender Automation and Racial Disparities in Credit Access
92 Pages Posted: 11 Oct 2021 Last revised: 21 Nov 2022
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: Suggested Citation
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
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