Open Banking and Customer Data Sharing: Implications for Fintech Borrowers

67 Pages Posted: 30 Nov 2022 Last revised: 17 Oct 2023

See all articles by Rachel J. Nam

Rachel J. Nam

Goethe University Frankfurt; Leibniz Institute for Financial Research SAFE

Date Written: October 16, 2023

Abstract

Open banking enables loan applicants to easily share payment data, which in theory could improve credit access by reducing information asymmetry but also raises concerns about price discrimination that exploits individuals’ preferences. Using loan data from a leading German FinTech lender, I document that observably riskier applicants (with lower credit scores) are more inclined to disclose data. Data sharing consequently leads to higher loan approval rates and reduced interest rates and is associated with lower ex post defaults. The findings suggest that open banking and data sharing can result in more efficient credit allocation and reduced adverse selection.

Keywords: Open banking, FinTech, Marketplace lending, P2P lending, Big Data, Customer data sharing, Data access, Data portability, Digital footprint

JEL Classification: D12, G21, G28, G50

Suggested Citation

Nam, Rachel J., Open Banking and Customer Data Sharing: Implications for Fintech Borrowers (October 16, 2023). SAFE Working Paper No. 364, Available at SSRN: https://ssrn.com/abstract=4278803 or http://dx.doi.org/10.2139/ssrn.4278803

Rachel J. Nam (Contact Author)

Goethe University Frankfurt ( email )

Finance Department
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

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