Privacy regulation and fintech lending

Sebastian Doerr, Leonardo Gambacorta, Luigi Guiso and Marina Sanchez del Villar

No 1103, BIS Working Papers from Bank for International Settlements

Abstract: We find that, following the introduction of the CCPA, loan applications to fintechs increase by significantly more than those to traditional banks, leading to an increase in fintechs' market share by up to 19%. This increase can be attributed to applicants' increased willingness to share their data. Fintechs, taking advantage of this data, expand their utilisation of information beyond traditional credit scores during the application process. Consequently, they engage in more personalised pricing and reject a larger proportion of applications. These findings suggest that fintechs enhance their screening process, leading to an improvement in the quality of their average borrower. As a result, fintechs are able to offer significantly lower loan rates than banks can following the CCPA's implementation. In sum, the CCPA has benefited consumers by providing fintech lenders, equipped with advanced screening technology, with improved access to data.

Keywords: data privacy; data sharing; fintech; privacy regulation; CCPA (search for similar items in EconPapers)
JEL-codes: G21 G23 G28 (search for similar items in EconPapers)
Date: 2023-06
New Economics Papers: this item is included in nep-ban, nep-mfd, nep-pay and nep-reg
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Citations: View citations in EconPapers (6)

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Working Paper: Privacy regulation and fintech lending (2023)
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