What is Fueling FinTech Lending? The Role of Banking Market Structure

FinTech growth raises questions about its competitive advantages vis-a-vis traditional providers, the relative risks of FinTech products, and real economic effects. We study FinTech platform small business lending, yielding new answers that may apply to FinTech more generally. Findings suggest that FinTech tends to replace loans by large/out-of-market banks more than small/in-market banks. This is consistent with FinTech advantages in more efficient processing of hard information, rather than hardening of soft information. Additional results suggest that FinTech loans are relatively risky, but become safer after replacing bank loans. Both FinTech and bank loans are found to benefit the real economy.