Fintech Borrowers: Lax-Screening or Cream-Skimming?

Marco Di Maggio and Vincent Yao

No 28021, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the personal credit market using unique individual-level data covering fintech and traditional lenders. We show that fintech lenders acquire market share by first lending to higher-risk borrowers and then to safer borrowers, and mainly rely on hard information to make credit decisions. Fintech borrowers are significantly more likely to default than neighbor individuals with the same characteristics borrowing from traditional financial institutions. Furthermore, they tend to experience only a short- lived reduction in the cost of credit, because their indebtedness increases more than non-fintech borrowers a few months after loan origination. However, fintech lenders' pricing strategies are likely to take this into account.

JEL-codes: G21 G23 G4 (search for similar items in EconPapers)
Date: 2020-10
New Economics Papers: this item is included in nep-ban and nep-pay
Note: ME
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Citations: View citations in EconPapers (16)

Published as Marco Di Maggio & Vincent Yao & Itay Goldstein, 2021. "Fintech Borrowers: Lax Screening or Cream-Skimming?," The Review of Financial Studies, vol 34(10), pages 4565-4618.

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Journal Article: Fintech Borrowers: Lax Screening or Cream-Skimming? (2021)
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