Bridging the gap? A theoretical analysis of the net effect of FinTech entry on access to credit
Series: Working Papers. 2426.
Author: Josep Gisbert and José E. Gutiérrez Ambrocio
Fintech
- Economic growth and convergence
- Corporate finance
- Credit
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Abstract
The rise of FinTech lenders offers an opportunity to promote financial access but may disrupt banks’ banking efforts. This paper presents a banking model where an incumbent bank specializes in certain niche markets. When a FinTech lender enters, competition intensifies, reducing the bank’s gains from serving some of its niches. Although FinTech lending can help serve certain unattended niches, the bank may abandon others, creating an ambiguous impact on financial inclusion. Financial inclusion may even decline when the FinTech lender is less efficient at serving new niches and better able to compete with the bank for its customers.