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Using Technology to Tackle Discrimination in Lending: The Role of Fintechs in the Paycheck Protection Program

Author

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  • Rachel M.B. Atkins
  • Lisa Cook
  • Robert Seamans

Abstract

We assess the role of fintech firms in loans made through the Paycheck Protection Program (PPP), a US government policy response to the COVID-19 pandemic that provided loans to small businesses. We argue that fintech firms' reliance on technology rather than relationship-banking approaches used by traditional banks helps to address discrimination in lending, at least in part. Using newly released data on the PPP program, we find support for our arguments: while Black-owned businesses received loans that were approximately 50 percent lower than observationally similar White-owned businesses, the effect narrows considerably when fintechs are allowed to provide loans.

Suggested Citation

  • Rachel M.B. Atkins & Lisa Cook & Robert Seamans, 2022. "Using Technology to Tackle Discrimination in Lending: The Role of Fintechs in the Paycheck Protection Program," AEA Papers and Proceedings, American Economic Association, vol. 112, pages 296-298, May.
    • Handle: RePEc:aea:apandp:v:112:y:2022:p:296-98
    DOI: 10.1257/pandp.20221030
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    Cited by:

    1. Fairlie, Robert W., 2023. "The Impacts of COVID-19 on Racial Inequality in Business Earnings," IZA Discussion Papers 16412, Institute of Labor Economics (IZA).
    2. Kame Babilla, Thierry U., 2023. "Digital innovation and financial access for small and medium-sized enterprises in a currency union," Economic Modelling, Elsevier, vol. 120(C).
    3. Robert Fairlie & Robert W. Fairlie, 2023. "The Impacts of Covid-19 on Racial Inequality in Business Earnings," CESifo Working Paper Series 10634, CESifo.
    4. Robert W. Fairlie, 2022. "The Impacts of COVID-19 on Racial Inequality in Business Earnings," NBER Working Papers 30532, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination

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