Open banking: Credit market competition when borrowers own the data

Zhiguo He (), Jing Huang and Jidong Zhou

Journal of Financial Economics, 2023, vol. 147, issue 2, 449-474

Abstract: Open banking facilitates data sharing consented to by customers who generate the data, with the regulatory goal of promoting competition between traditional banks and challenger fintech entrants. We study lending market competition when sharing banks’ customer transaction data enables better borrower screening for fintechs. Open banking promotes competition if it helps level the playing field for all lenders in screening borrowers; however, if it over-empowers fintechs, it can also hinder competition and leave all borrowers worse off. Due to the credit quality inference from borrowers’ sign-up decisions, this remains true even if borrowers have the control of whether to share their banking data. We also study extensions with fintech affinities and data sharing on borrower preferences.

Keywords: Open banking; Data sharing; Banking competition; Digital economy; Winner’s curse; Privacy (search for similar items in EconPapers)
JEL-codes: G21 L13 L52 O33 O36 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Related works:
Working Paper: Open Banking: Credit Market Competition When Borrowers Own the Data (2022)
Working Paper: Open Banking: Credit Market Competition When Borrowers Own the Data (2020)
Working Paper: Open Banking: Credit Market Competition When Borrowers Own the Data (2020)
Working Paper: Open Banking: Credit Market Competition When Borrowers Own the Data (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:147:y:2023:i:2:p:449-474

DOI: 10.1016/j.jfineco.2022.12.003

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