How Digital Lending Shapes Bank Risk and Competition: Evidence from an Emerging Economy

Enrique Bátiz-Zuk, Anuar Bechara, Fabrizio López-Gallo and Corrado Macchiarelli

No 2026/198, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the effect of alternative digital lending—defined as digital credit provision by non‑bank financial intermediaries (NBFIs)—on bank and systemic risk taking and competition. The paper focuses on Sociedades Financieras Populares (SOFIPOs) which constitute a regulated and well‑documented NBFI segment allowing an empirical assessment of the relationship between digital non-bank lending expansion and bank outcomes. Using a quarterly sample of 53 Mexican banks and 8 of these non-banks for the period 2018Q1–2024Q4, we document that growth in alternative digital lending is associated with lower individual bank risk-taking and stronger competitive pressures, with the latter effect being stronger for small banks. Reflecting the moderate size of digital lenders in Mexico and the compositional reallocation between bank and non‑bank credit, overall systemic risk appears broadly unaltered by the entry of the new players.

Keywords: Digital finance; alternative lending; non-bank financial intermediaries; bank risk‑taking; systemic risk; competition; financial inclusion; Mexico (search for similar items in EconPapers)
Pages: 42
Date: 2026-09-18
New Economics Papers: this item is included in nep-cob, nep-com, nep-fdg, nep-pay and nep-rmg
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