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Atlanta Marriott Marquis, A707
Hosted By:
American Economic Association
cross-sectionally in the population. Millennials and Gen Xers incur fewer financial fees and penalties, whereas Baby Boomers do not benefit. Millennials increase their use of credit cards rather than overdrafts to manage short-term liabilities. Millennials shift spending to discretionary entertainment, whereas Gen Xers remain more austere. While men adopt the new technology faster, women enjoy a larger effect from less costly access to information.
first-time online credit use boosts firm development in terms of sales and transaction growth. These findings reveal the scope of China’s credit market frictions and the benefits of new credit technologies in completing credit markets.
The Impact of Digital Economy
Paper Session
Sunday, Jan. 6, 2019 1:00 PM - 3:00 PM
- Chair: Manju Puri, Duke University and NBER
Consumer-Lending Discrimination in the FinTech Era
Abstract
Ethnic discrimination in lending can occur in face-to-face decisions or in algorithmic scoring. The GSEs’ model for pricing credit risk provides us with an identified setting to estimate discrimination for FinTech and face-to-face lenders, as well as to offer a workable enforcement interpretation of U.S. fair-lending laws using the court’s justification of legitimate business necessity. We find that face-to-face and FinTech lenders charge Latinx/African-American borrowers 6-9 basis points higher interest rates, consistent with the extraction of monopoly rents in weaker competitive environments and from profiling borrowers on shopping behavior. In aggregate, Latinx/African-American pay $250-$500M per year in extra mortgage interest. FinTech algorithms have not removed discrimination, but two silver linings emerge. Algorithmic lending seems to have increased competition or encouraged more shopping with the ease of applications. Also, while face-to-face lenders discriminate against minorities in application rejection, FinTechs do not.FinTech Adoption Across Generations: Financial Fitness in the Information Age
Abstract
We analyze how FinTech adoption changes the use of consumer credit and financial fitness. We exploit the exogenous introduction of a smartphone application for personal financial management using a Regression Discontinuity in Time design. We find that FinTech adoption reduces financial fee payments, but differscross-sectionally in the population. Millennials and Gen Xers incur fewer financial fees and penalties, whereas Baby Boomers do not benefit. Millennials increase their use of credit cards rather than overdrafts to manage short-term liabilities. Millennials shift spending to discretionary entertainment, whereas Gen Xers remain more austere. While men adopt the new technology faster, women enjoy a larger effect from less costly access to information.
TechFin in China: Credit Market Completion and Its Growth Effect
Abstract
Ant Financial provides automated credit lines to more than a million firms trading on Alibaba’s Taobao e-commerce platform. Monthly credit records show how TechFin mitigates local credit supply frictions in China’s segmented credit market and extends the “frontier” of credit availability to firms with a low credit score. We use a discontinuity in the credit decision algorithm to document that a firm’s credit approval andfirst-time online credit use boosts firm development in terms of sales and transaction growth. These findings reveal the scope of China’s credit market frictions and the benefits of new credit technologies in completing credit markets.
Discussant(s)
Gregor Matvos
,
University of Texas-Austin and NBER
Manuel Adelino
,
Duke University, CEPR and NBER
Paolina C. Medina
,
Texas A&M University
Zhiguo He
,
University of Chicago and NBER
JEL Classifications
- G2 - Financial Institutions and Services
- A1 - General Economics