Fintech Borrowers: Lax-Screening or Cream-Skimming? / Marco Di Maggio, Vincent Yao.

By:

Maggio, Marco Di

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w28021.Publication details: Cambridge, Mass. National Bureau of Economic Research 2020.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We study the personal credit market using unique individual-level data covering fintech and traditional lenders. We show that fintech lenders acquire market share by first lending to higher-risk borrowers and then to safer borrowers, and mainly rely on hard information to make credit decisions. Fintech borrowers are significantly more likely to default than neighbor individuals with the same characteristics borrowing from traditional financial institutions. Furthermore, they tend to experience only a short- lived reduction in the cost of credit, because their indebtedness increases more than non-fintech borrowers a few months after loan origination. However, fintech lenders' pricing strategies are likely to take this into account.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w28021 (Browse shelf(Opens below))	Not For Loan

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October 2020.

We study the personal credit market using unique individual-level data covering fintech and traditional lenders. We show that fintech lenders acquire market share by first lending to higher-risk borrowers and then to safer borrowers, and mainly rely on hard information to make credit decisions. Fintech borrowers are significantly more likely to default than neighbor individuals with the same characteristics borrowing from traditional financial institutions. Furthermore, they tend to experience only a short- lived reduction in the cost of credit, because their indebtedness increases more than non-fintech borrowers a few months after loan origination. However, fintech lenders' pricing strategies are likely to take this into account.