This article studies how the rise of financial technology (Fintech) lending affects credit access, interest rates, and social welfare. We consider a lending competition model with two incumbent banks and a Fintech lender, which use different information and technologies to assess borrower creditworthiness. We show that Fintech lending could negatively affect high-quality borrowers’ access to credit when the Fintech lender’s screening accuracy is superior to that of the banks. Furthermore, Fintech lending may worsen the allocative efficiency of credit and reduce social welfare under some conditions. Analytical and numerical results suggest that Fintech lending mostly reduces the expected interest rates

Hundreds of equity market intelligence financial technology firms (FinTechs) have formed in the last decade. We assemble novel data to describe their capabilities, users, and consequences. Our data suggest that these FinTechs i) aggregate many data sources, including nontraditional ones (e.g., Twitter, blogs), and synthesize such data using artificial intelligence to make investment recommendations, and ii) change Internet users’ information discovery by serving as substitutes for traditional information providers. We evaluate some nontraditional data and find evidence suggesting that such data contain valuable information or “crowd wisdom” that links to informational efficiency. Overall, our findings are consistent with this innovation benefiting investors and markets

After exogenous demand shocks caused by natural disasters, FinTech lenders are more responsive to increased demand for reconstruction mortgages than traditional banks and non-FinTech shadow banks. Both FinTech and traditional banks increase credit supply, but FinTech supply is more elastic without increases in risk-adjusted interest rates or delinquency rates. Comparing lending supply channels, banks respond to regulatory incentives to lend to damaged areas, whereas FinTech lenders supply more credit when traditional banks rely more on balance sheet financing and physical branch networks. Compared to traditional banks, FinTech lenders increase supply elasticity more aggressively in response to local competitive pressure

We analyze how corporate direct investments in fintech startups affect startup performance and that of investing firms. Corporate investment in fintech startups is associated with a greater likelihood of successful exit, more and higher-quality innovation, and a greater inflow of high-quality inventors. A stacked difference-in-differences analysis shows that direct investments enhance the operating performance and equity-market valuation of corporate investors in the financial services sector, but not those in the nonfinancial sector. We establish two channels that drive fintech startups’ performance improvements: strategic alliance formation between investors and startups, and enhanced startup monitoring by corporate investors

We analyze lending by traditional as well as fintech lenders during COVID-19. Comparing samples of fintech and bank loan records across the outbreak, we find that fintech companies are more likely to expand credit access to new and financially constrained borrowers after the start of the pandemic. However, this increased credit provision may not be sustainable; the delinquency rate of fintech loans triples after the outbreak, but there is no significant change in the delinquency of bank loans. Borrowers holding both loan types prioritize the payment of bank loans. These results shed light on the benefits provided by shadow banking in a crisis and hint at the potential fragility of such institutions when delinquency rates spike

We document the unique structure of the peer-to-peer lending market. Originally designed as decentralized, the market has become highly, but not fully, reintermediated. The platforms’ software now performs essentially all tasks related to loan evaluation, whereas most lenders are passive and automatically fund most applications on offer. Yet unlike banks, and in contrast to theories predicting full reintermediation, the platforms provide detailed loan information, and some active loan pickers coexist with passive investors. We argue that while intermediation attracts unsophisticated passive investors, transparency in the presence of active investors resolves the lending platform’s moral hazard problem inherent in intermediated markets.

This article studies the impact of retail investors on stock liquidity during the COVID-19 pandemic lockdown in spring 2020. Retail trading exhibits a sharp increase, especially among stocks with high COVID-19–related media coverage. Retail trading attenuated the rise in illiquidity by roughly 40% but less so for high-media-attention stocks. Causality is addressed using the staggered implementation of the stay-at-home advisory across U.S. states. The results highlight that ample free time and access to financial markets facilitated by fintech innovations to trading platforms are significant determinants of retail-investor stock market participation

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We report the results of a longitudinal intervention with students across 5 universities in China designed to reduce online consumer debt. We allocate participants to either a financial literacy treatment group, a self-control treatment group, or a zero-touch control group. Our self-control training intervention features detailed tracking of spending and borrowing, budgeting, and introspection about consumption choices. This intervention reduces online borrowing and delinquency charges, mainly driven by a reduction in entertainment-related spending and borrowing. In contrast, financial literacy interventions improve test scores but only marginally affect borrowing. Our results suggest that cultivating self-regulation and budgeting skills can improve borrowing behavior on e-commerce platforms