Financial technology and relationship lending: Complements or substitutes?

Mark Kutzbach and Jonathan Pogach

Journal of Financial Intermediation, 2024, vol. 59, issue C

Abstract: We describe the dimensions along which bank technologies differ from fintech competitors and construct a novel measure of a bank’s technology based upon its overlap with fintech firms in terms of granular product installation data. A one standard deviation increase in our financial technology measure is associated with an 8.3 percentage point increase in Paycheck Protection Program (PPP) loans in 2020Q2. We show that smaller banks benefited more from marginal technology gains, that technology facilitated out-of-area lending, and that technology complemented small banks’ branch-based in-area lending. In a difference-in-differences analysis, we show an outsized increase in small business lending growth in 2020 for high tech small banks relative to their peers.

Keywords: Banking; Fintech; Technology; Paycheck Protection Program; COVID-19; Commercial & industrial lending; Small business lending (search for similar items in EconPapers)
JEL-codes: G21 G23 O3 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:59:y:2024:i:c:s1042957324000299

DOI: 10.1016/j.jfi.2024.101101

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