Does FinTech Substitute for Banks? Evidence from the Paycheck Protection Program

Isil Erel and Jack Liebersohn

No 27659, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: New technology promises to expand the supply of financial services to small businesses poorly served by the banking system. Does it succeed? We study the response of FinTech to financial services demand created by the introduction of the Paycheck Protection Program (PPP). We find that FinTech is disproportionately used in ZIP codes with fewer bank branches, lower incomes, and a larger minority share of the population, as well as in industries with little ex ante small-business lending. FinTech’s role in PPP provision is also greater in counties where the economic effects of the COVID-19 pandemic were more severe. We estimate that more PPP provision by traditional banks causes statistically significant but economically small substitution away from FinTechs, implying that FinTech mostly expands the overall supply of financial services, rather than redistributing it.

JEL-codes: G00 G01 G2 G21 G23 G28 H12 H2 H3 (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-ban and nep-pay
Note: CF
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Citations: View citations in EconPapers (80)

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