Open banking and customer data sharing: Implications for FinTech borrowers

Rachel J. Nam

No 364, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: With open banking, consumers take greater control over their own financial data and share it at their discretion. Using a rich set of loan application data from the largest German FinTech lender in consumer credit, this paper studies what characterizes borrowers who share data and assesses its impact on loan application outcomes. I show that riskier borrowers share data more readily, which subsequently leads to an increase in the probability of loan approval and a reduction in interest rates. The effects hold across all credit risk profiles but are the most pronounced for borrowers with lower credit scores (a higher increase in loan approval rate) and higher credit scores (a larger reduction in interest rate). I also find that standard variables used in credit scoring explain substantially less variation in loan application outcomes when customers share data. Overall, these findings suggest that open banking improves financial inclusion, and also provide policy implications for regulators engaged in the adoption or extension of open banking policies.

Keywords: Open banking; FinTech; Marketplace lending; P2P lending; Big data; Customer data sharing; Data access; Data portability; Digital footprints (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-ban, nep-big, nep-fle, nep-fmk, nep-pay and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:364

DOI: 10.2139/ssrn.4278803

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