Payment Fintechs and Debt Enforcement

Kumar Rishabh and Jorma Schäublin ()

Working papers from Faculty of Business and Economics - University of Basel

Abstract: Fintech payment companies acting as lenders possess a potential solution to weak debt enforcement. Their location in the payment chain yields them a senior position in the revenue stream of the borrowing merchant, as the payment company can deduct part of the merchant's sales it processes to amortize the loan. Our analysis of the transactions processed through a fintech company offering such sales-linked loans suggests that some borrowers discontinuously reduce sales processed through the company immediately after the loan disbursal to strategically default. We find that competition from other lenders and cash limits the effectiveness of this enforcement technology.

Keywords: Fintech lending; limited enforcement; sales manipulation; regression discontinuity (search for similar items in EconPapers)
JEL-codes: G20 G21 G23 (search for similar items in EconPapers)
Date: 2021-01-19
New Economics Papers: this item is included in nep-ban, nep-cwa and nep-pay
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https://edoc.unibas.ch/84387/1/2021_02_R_Payment%2 ... ment_June%202021.pdf (application/pdf)
https://edoc.unibas.ch/81018/ original version (application/pdf)
https://edoc.unibas.ch/84387/ revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:bsl:wpaper:2021/02

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