The Effects of Fintech Adoption on Bank Loan Spreads

Abstract

This study examines the impact of FinTech adoption on bank loan spreads and lending practices. By analyzing data from bank 10-K filings, we develop a novel metric to assess FinTech adoption at the individual bank level. Our analysis reveals a significant positive correlation between increased FinTech adoption and higher loan spreads, particularly for loans that are relatively informationally opaque. This causality is further validated through a quasi-natural experiment. Additionally, we identify trends toward loans with smaller sizes and longer maturities in banks with advanced FinTech integration. Overall, these findings indicate FinTech enhances efficiency in processing hard information and holds the potential to enhance financial inclusion.

Keywords: FinTech adoption, information advantage, bank loan spreads, and lending practices.

JEL Classification: G21