Customer Data Access and Fintech Entry: Early Evidence from Open Banking

Abstract

Open banking is the trend of empowering customers to share their banking data with fintechs and other banks. We compile a novel dataset documenting that governments in 49 countries have implemented open banking policies and 31 more are in active discussions. Following adoption, fintech venture capital investment increases by 50%, with more comprehensive policies showing larger effects. We examine the policy tradeoffs with a quantitative model of consumer data production and usage. Our calibrations show that customer-directed data sharing increases entry by improving entrant screening ability and product offerings, but harms some customers and can reduce ex-ante information production.

Keywords: Open banking, entrepreneurship, fintech, financial innovation, data access, data rights, data portability, Big Data, financial regulation, financial sector, banks

JEL Classification: G21, G28