Fintech Borrowers: Lax Screening or Cream-Skimming?

By Marco Di Maggio, Vincent Yao. The Review of financial studies, 2020

214 citations recorded by the source corpus.

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 lending first to higher-risk borrowers and then to safer borrowers, and rely mainly 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 a short-lived reduction in the cost of credit, because their indebtedness increases more than non-fintech borrowers after loan origination. However, fintech lenders’ pricing strategies are likely to take this into account.

View Paper: https://www.semanticscholar.org/paper/a4e3fab1635bc2b452256bdb0837c9fbbdc24a20

Citations in the corpus

• Shadow Banking in a Crisis: Evidence from Fintech During COVID-19 (2021, unknown): “…(2014); Cerqueiro, Ongena, and Roszbach (2016); Fisman, Paravisini, and Vig (2017)) and fintech companies (see Chava, Paradkar, and Zhang (2017); Di Maggio and Yao (2020)). from many western lending markets, which are diversified, consisting of commercial banks, fintech companies, title lenders,…”
• Open Banking: Credit Market Competition When Borrowers Own the Data (2020, unknown): “10 Di Maggio and Yao (2020) show that some borrowers’ desire for immediate consumption with fintech loans exacerbates their self-control issues to overborrow, a point that is consistent with one interpretation of fintech affinity studied in Section 5.2 .”