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Working Paper
The Impact of Fintech Lending on Credit Access for U.S. Small Businesses
Small business lending (SBL) plays an important role in funding productive investment and fostering local economic growth. Recently, nonbank lenders have gained market share in the SBL market in the United States, especially relative to community banks. Among nonbanks, fintech lenders have become particularly active, leveraging alternative data for their own internal credit scoring. We use proprietary loan-level data from two fintech SBL platforms (Funding Circle and LendingClub) to explore the characteristics of loans originated pre-pandemic (2016‒2019). Our results show that fintech SBL ...
Briefing
“Give Me Some Credit!”: Using Alternative Data to Expand Credit Access
Fintechs, credit bureaus, and financial institutions are collecting alternative data to develop new scoring models that supplement traditional credit reports. Studies, providers, and pilot programs suggest that these alternative data can improve credit reporting and thereby expand access to fair credit. However, use of alternative data is still low due to both uncertainty about the benefits relative to the cost and consumer concerns about use and privacy.
Working Paper
The Role of Bank-Fintech Partnerships in Creating a More Inclusive Banking System
Fintech firms are often viewed as competing with banks. Instead, more recently, there has been growth in partnership and collaboration between fintech firms and banks. These partnerships have allowed banks to access more information on consumers through data aggregation, artificial intelligence/machine learning (AI/ML), and other tools. We explore the demographics of consumers targeted by banks that have entered into such partnerships. Specifically, we test whether banks are more likely to extend credit offers (by mail) and/or credit originations to consumers who would have otherwise been ...
Working Paper
Did Fintech Loans Default More During the COVID-19 Pandemic? Were Fintech Firms “Cream-Skimming” the Best Borrowers?
A growing portion of consumer credit has recently been devoted to unsecured personal installment loans. Fintech firms have been active players in this market, with an increasing market share, while the market share of banks has declined. Studies of fintech lending have shown that their digital access and ability to leverage alternative data have increased accessibility in underserved areas, enabled consumers with thin credit files to obtain credit, and provided a lower cost alternative to long-term credit card financing. This paper exams three questions: (1) Do proprietary loan rating systems ...
Working Paper
A Survey of Fintech Research and Policy Discussion
The intersection of finance and technology, known as fintech, has resulted in the dramatic growth of innovations and has changed the entire financial landscape. While fintech has a critical role to play in democratizing credit access to the unbanked and thin-file consumers around the globe, those consumers who are currently well served also turn to fintech for faster services and greater transparency. Fintech, particularly the blockchain, has the potential to be disruptive to financial systems and intermediation. Our aim in this paper is to provide a comprehensive fintech literature survey ...