Borrowing from a Bigtech Platform

59 Pages Posted: 21 Sep 2022 Last revised: 23 Oct 2022

See all articles by Jian Li

Jian Li

Columbia University

Stefano Pegoraro

University of Notre Dame - Department of Finance

Date Written: August 31, 2022


We model competition in the credit market between banks and a bigtech platform which offers a marketplace for merchants. We show that, unlike banks, the platform lends to merchants based on their revenues and network externalities. To enforce partial loan repayment, the platform increases borrowers' transaction fees. Credit markets become partially segmented, with the platform targeting borrowers of low and medium credit quality. The platform benefits from advantageous selection at the expense of banks, reducing equilibrium welfare for intermediate-credit-quality merchants. When revenues, network externalities, or advantagenous-selection rents are large, the platform does not value superior information about credit quality.

Keywords: Bigtech, platform, advantageous selection, welfare, credit rationing

JEL Classification: G21, G23, C72, D82

Suggested Citation

Li, Jian and Pegoraro, Stefano, Borrowing from a Bigtech Platform (August 31, 2022). Available at SSRN: or

Jian Li

Columbia University ( email )

3022 Broadway
New York, NY NY 10027
United States
7739871203 (Phone)
10025 (Fax)

Stefano Pegoraro (Contact Author)

University of Notre Dame - Department of Finance ( email )

P.O. Box 399
Notre Dame, IN 46556-0399
United States
5746312240 (Phone)
46556 (Fax)

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