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Interest rates as a finance battleground? The rise of Fintech and big tech credit providers and bank interest margin

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  • Hodula, Martin

Abstract

Using data from 91 countries spanning 2013–2019, I show that the rise of alternative credit lines (fintech and big tech) can be robustly associated with decreasing profit margins in the banking sector. Results show that traditional banks may have responded defensively to the rising share of alternative credit lines, lowering lending rates and increasing deposit rates. The evidence is robust and remains significant even when countries with a larger share of alternative credit lines are taken out of the sample. The paper presents several promising avenues for future research.

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  • Hodula, Martin, 2023. "Interest rates as a finance battleground? The rise of Fintech and big tech credit providers and bank interest margin," Finance Research Letters, Elsevier, vol. 53(C).
    • Handle: RePEc:eee:finlet:v:53:y:2023:i:c:s1544612323000594
    DOI: 10.1016/j.frl.2023.103685
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    References listed on IDEAS

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    Cited by:

    1. Plakandaras, Vasilios & Gupta, Rangan & Karmakar, Sayar & Wohar, Mark E., 2023. "Are real interest rates a monetary phenomenon? Evidence from 700 years of data," Research in International Business and Finance, Elsevier, vol. 66(C).
    2. Lee, Hangsuck & Ha, Hongjun & Lee, Minha, 2024. "A sharing rule for multi-period interest-sensitive insurance contracts," The North American Journal of Economics and Finance, Elsevier, vol. 71(C).
    3. Cuadros-Solas, Pedro J. & Cubillas, Elena & Salvador, Carlos, 2023. "Does alternative digital lending affect bank performance? Cross-country and bank-level evidence," International Review of Financial Analysis, Elsevier, vol. 90(C).
    4. Tanja Verster & Erika Fourie, 2023. "The Changing Landscape of Financial Credit Risk Models," IJFS, MDPI, vol. 11(3), pages 1-15, August.
    5. Hodula, Martin, 2024. "Beyond innovation: Fintech credit and its ripple effects on traditional banking profitability," Finance Research Letters, Elsevier, vol. 63(C).

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    More about this item

    Keywords

    Banking; Big tech; Credit; Fintech; Net interest margin;
    All these keywords.

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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