Bridging the Gap? A Theoretical Analysis of the Net Effect of FinTech Entry on Access to Credit

Abstract

FinTech lenders offer an opportunity to enhance credit access but may also disrupt traditional banking. This study proposes a theoretical framework for analyzing the net impact of FinTech's entry on access to credit in credit markets dominated by conventional banks. When a FinTech lender enters the market, competition intensifies, which reduces the bank's gain in serving certain customer segments. While FinTech lending can help serve some unattended niches, it may cause the bank to abandon others, leading to an ambiguous or even negative impact on access to credit.

Keywords: FinTech, financial inclusion, soft information, regulatory arbitrage, economic growth, financial stability