Open Banking: Credit Market Competition When Borrowers Own the Data

Zhiguo He (), Jing Huang and Jidong Zhou ()

No 28118, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Open banking facilitates data sharing consented by customers who generate the data, with a regulatory goal of promoting competition between traditional banks and challenger fintech entrants. We study lending market competition when sharing banks' customer data enables better borrower screening or targeting by fintech lenders. Open banking could make the entire financial industry better off yet leave all borrowers worse off, even if borrowers could choose whether to share their data. We highlight the importance of equilibrium credit quality inference from borrowers' endogenous sign-up decisions. When data sharing triggers privacy concerns by facilitating exploitative targeted loans, the equilibrium sign-up population can grow with the degree of privacy concerns.

JEL-codes: D18 G21 L13 L15 L51 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-ban, nep-big, nep-com and nep-pay
Note: AP CF IO LE ME PR
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Citations: View citations in EconPapers (14)

Published as Zhiguo He & Jing Huang & Jidong Zhou, 2023. "Open banking: Credit market competition when borrowers own the data," Journal of Financial Economics, vol 147(2), pages 449-474.

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Related works:
Journal Article: Open banking: Credit market competition when borrowers own the data (2023)
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)
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