Fintech Borrowers: Lax-Screening or Cream-Skimming?
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.
The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
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.