Fintech and the Financing of Entrepreneurs: From Crowdfunding to Marketplace Lending

Abstract

For the last decade economists have been preoccupied with the decline in bank financing to small businesses and entrepreneurs. This effort has produced a better understanding of the obstacles to external financing. We examine the market and policy instruments that in some sense encourage more bank lending to SMEs. This leads us to explore the recent surge in Fintech lending that has affected the ability of SMEs and entrepreneurial firms to obtain loans. We consider recent evidence that the growth of alternative online lending has supplied new competition to traditional banks and is beginning to disrupt the traditional of business of lending. Finally, we examine the regulatory responses to Fintech in seventeen jurisdictions. We examine the first time that venture capitalists invest in Fintech companies to determine whether there is a meaningful connection between levels of investment and regulatory choice. Our findings have implications for how regulation is likely to play an important role in the development of Fintech.