Do Fintech Shadow Banks Compete with Technological Advantages? Evidence from Mortgage Lending

68 Pages Posted: 28 Oct 2022 Last revised: 22 Feb 2024

See all articles by Siyi Shen

Siyi Shen

The Chinese University of Hong Kong, Shenzhen - School of Management and Economics

Sijie Wang

The Chinese University of Hong Kong, Shenzhen - School of Management and Economics

Xiang Zheng

University of Connecticut - Department of Finance

Date Written: February 21, 2024

Abstract

This paper examines the purported innovativeness of fintech shadow banks relative to banks. Contrary to common perceptions of fintech's technological advantage, banks have exceeded fintech shadow banks in digital capital investments and patenting activities. As a result, while fintech initially charged higher mortgage rates without higher subsequent defaults, this premium has decreased and reversed. Nevertheless, fintech shadow banks investing heavily in digital capital can maintain their competitive edges over traditional banks regarding mortgage price, performance, and market share. Finally, fintech's shift to targeting underserved minorities to circumvent direct competition from banks may promote financial inclusion but potentially raise credit risk.

Keywords: Fintech, Shadow Bank, Mortgage, Digital Capital, Competition

JEL Classification: G21, G23, O31

Suggested Citation

Shen, Siyi and Wang, Sijie and Zheng, Xiang, Do Fintech Shadow Banks Compete with Technological Advantages? Evidence from Mortgage Lending (February 21, 2024). Available at SSRN: https://ssrn.com/abstract=4222543 or http://dx.doi.org/10.2139/ssrn.4222543

Siyi Shen (Contact Author)

The Chinese University of Hong Kong, Shenzhen - School of Management and Economics ( email )

2001 Longxiang Road, Longgang District
Shenzhen, 518172
China

Sijie Wang

The Chinese University of Hong Kong, Shenzhen - School of Management and Economics ( email )

2001 Longxiang Road, Longgang District
Shenzhen, 518172
China

Xiang Zheng

University of Connecticut - Department of Finance ( email )

School of Business
2100 Hillside Road
Storrs, CT 06269
United States

HOME PAGE: http://www.xiangzheng.info/

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