Less E-Commerce Platform Competition Benefits Financial Inclusion

Abstract

Consumer credit is now often instantly available on E-commerce platforms. This paper incorporates the liquidity provision into the consideration of platform competition. A platform needs to strike a balance between consumer rebates and consumer credit. We show that if there is an insufficient supply of consumer credit by the banking sector, less platform competition could lead to more consumer credit and better financial inclusion. The underlying reason is that more market power gives platforms more freedom to pursue cost-efficiency by offering consumer credit. In the general equilibrium setting, we discuss the welfare implications of platforms' credit provision and the presence of present-biased consumers.

Keywords: consumer credit, E-commerce, platform competition, financial inclusion, economy of scope

JEL Classification: D43, D53, G51, L13