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Mortgage lending through a fintech web platform. The roles of competition, diversification, and automation

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  • Basten, Christoph
  • Ongena, Steven

Abstract

How do banks offer and price mortgages when an online platform enables them to reach regions where they have no branches? With unique data on responses from differently located banks to each applying household and a shift-share instrument for market concentration, we find banks to make more and cheaper offers to more concentrated local markets. We rationalize this as investments in lucrative market shares given customer switching costs. Banks also improve their inter-regional portfolio diversification with more attractive offers to regions more complementary to their home locales. Finally, banks` choices become increasingly automated, reducing their operating costs.

Suggested Citation

  • Basten, Christoph & Ongena, Steven, 2024. "Mortgage lending through a fintech web platform. The roles of competition, diversification, and automation," Journal of Banking & Finance, Elsevier, vol. 163(C).
    • Handle: RePEc:eee:jbfina:v:163:y:2024:i:c:s0378426624001110
    DOI: 10.1016/j.jbankfin.2024.107194
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    More about this item

    Keywords

    Mortgage lending; Spatial competition; Multi-product pricing; Cross-selling; Switching costs; Complementary demand; Bartik instrument; Shift-share instrument; Credit risk; Diversification; Automation; FinTech;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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