IDEAS home Printed from https://ideas.repec.org/a/eee/jebusi/v121y2022ics0148619522000261.html
   My bibliography  Save this article

How do banking fintech services affect SME debt?

Author

Listed:
  • Fasano, Francesco
  • Cappa, Francesco

Abstract

Fintech technologies have become increasingly important in the banking industry, as they allow alternative effective means to interact with clients and collect hard information, i.e. codifiable data, to make better lending decisions. However, the advent of technology contrasts with the traditional bank-firm relationship based on human interactions and soft information. This study examines whether fintech favors or hampers the amount of debt finance issued by SMEs. Our findings reveal that the use of internet banking reduces SME debt, suggesting that credit decisions based on hard information reduce the likelihood of SMEs using bank debt. A key implication of our findings is that banks and entrepreneurs should reinforce their personal relationships.

Suggested Citation

  • Fasano, Francesco & Cappa, Francesco, 2022. "How do banking fintech services affect SME debt?," Journal of Economics and Business, Elsevier, vol. 121(C).
    • Handle: RePEc:eee:jebusi:v:121:y:2022:i:c:s0148619522000261
    DOI: 10.1016/j.jeconbus.2022.106070
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0148619522000261
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jeconbus.2022.106070?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. N. Berger, Allen & F. Udell, Gregory, 1998. "The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 613-673, August.
    2. Binks, Martin R & Ennew, Christine T, 1997. "The Relationship between U.K. Banks and Their Small Business Customers," Small Business Economics, Springer, vol. 9(2), pages 167-178, April.
    3. Ozkan, Aydin & Ozkan, Neslihan, 2004. "Corporate cash holdings: An empirical investigation of UK companies," Journal of Banking & Finance, Elsevier, vol. 28(9), pages 2103-2134, September.
    4. Stijn Claessens & Jon Frost & Grant Turner & Feng Zhu, 2018. "Fintech credit markets around the world: size, drivers and policy issues," BIS Quarterly Review, Bank for International Settlements, September.
    5. Marko Jakšič & Matej Marinč, 2019. "Relationship banking and information technology: the role of artificial intelligence and FinTech," Risk Management, Palgrave Macmillan, vol. 21(1), pages 1-18, March.
    6. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    7. Cerqueiro, Geraldo & Degryse, Hans & Ongena, Steven, 2011. "Rules versus discretion in loan rate setting," Journal of Financial Intermediation, Elsevier, vol. 20(4), pages 503-529, October.
    8. Cerqueiro, Geraldo & Degryse, Hans & Ongena, Steven, 2011. "Rules versus discretion in loan rate setting," Journal of Financial Intermediation, Elsevier, vol. 20(4), pages 503-529, October.
    9. Jie Gan & Timothy J. Riddiough, 2008. "Monopoly and Information Advantage in the Residential Mortgage Market," The Review of Financial Studies, Society for Financial Studies, vol. 21(6), pages 2677-2703, November.
    10. Lee, In & Shin, Yong Jae, 2018. "Fintech: Ecosystem, business models, investment decisions, and challenges," Business Horizons, Elsevier, vol. 61(1), pages 35-46.
    11. Allen N. Berger & W. Scott Frame, 2007. "Small Business Credit Scoring and Credit Availability," Journal of Small Business Management, Taylor & Francis Journals, vol. 45(1), pages 5-22, January.
    12. Adhami, Saman & Giudici, Giancarlo & Martinazzi, Stefano, 2018. "Why do businesses go crypto? An empirical analysis of initial coin offerings," Journal of Economics and Business, Elsevier, vol. 100(C), pages 64-75.
    13. Rajan, Raghuram G & Zingales, Luigi, 1998. "Financial Dependence and Growth," American Economic Review, American Economic Association, vol. 88(3), pages 559-586, June.
    14. Thorsten Beck & Asli Demirgüç‐Kunt & Vojislav Maksimovic, 2005. "Financial and Legal Constraints to Growth: Does Firm Size Matter?," Journal of Finance, American Finance Association, vol. 60(1), pages 137-177, February.
    15. Anagnostopoulos, Ioannis, 2018. "Fintech and regtech: Impact on regulators and banks," Journal of Economics and Business, Elsevier, vol. 100(C), pages 7-25.
    16. Jon Frost, 2020. "The economic forces driving FinTech adoption across countries," Working Papers 663, DNB.
    17. Paul Moon Sub Choi & Joung Hwa Choi & Chune Young Chung & Yun Joo An, 2020. "Corporate Governance and Capital Structure: Evidence from Sustainable Institutional Ownership," Sustainability, MDPI, vol. 12(10), pages 1-8, May.
    18. Uchida, Hirofumi & Udell, Gregory F. & Yamori, Nobuyoshi, 2012. "Loan officers and relationship lending to SMEs," Journal of Financial Intermediation, Elsevier, vol. 21(1), pages 97-122.
    19. Rebecca Nüesch & Rainer Alt & Thomas Puschmann, 2015. "Hybrid Customer Interaction," Business & Information Systems Engineering: The International Journal of WIRTSCHAFTSINFORMATIK, Springer;Gesellschaft für Informatik e.V. (GI), vol. 57(1), pages 73-78, February.
    20. Jens Grunert & Lars Norden, 2012. "Bargaining power and information in SME lending," Small Business Economics, Springer, vol. 39(2), pages 401-417, September.
    21. Li, Shaofang & Marinč, Matej, 2018. "Economies of scale and scope in financial market infrastructures," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 53(C), pages 17-49.
    22. Nathan Nunn, 2007. "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 122(2), pages 569-600.
    23. Peter Gomber & Jascha-Alexander Koch & Michael Siering, 2017. "Digital Finance and FinTech: current research and future research directions," Journal of Business Economics, Springer, vol. 87(5), pages 537-580, July.
    24. Nambisan, Satish & Wright, Mike & Feldman, Maryann, 2019. "The digital transformation of innovation and entrepreneurship: Progress, challenges and key themes," Research Policy, Elsevier, vol. 48(8), pages 1-1.
    25. DeYoung, Robert & Lang, William W. & Nolle, Daniel L., 2007. "How the Internet affects output and performance at community banks," Journal of Banking & Finance, Elsevier, vol. 31(4), pages 1033-1060, April.
    26. Sumit Agarwal, 2010. "Distance and Private Information in Lending," The Review of Financial Studies, Society for Financial Studies, vol. 23(7), pages 2757-2788, July.
    27. Harris, Milton & Raviv, Artur, 1991. "The Theory of Capital Structure," Journal of Finance, American Finance Association, vol. 46(1), pages 297-355, March.
    28. Steven M. Fazzari & R. Glenn Hubbard & Bruce C. Petersen, 1988. "Financing Constraints and Corporate Investment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 141-206.
    29. Cappa, Francesco & Cetrini, Giorgio & Oriani, Raffaele, 2020. "The impact of corporate strategy on capital structure: evidence from Italian listed firms," The Quarterly Review of Economics and Finance, Elsevier, vol. 76(C), pages 379-385.
    30. Rajan, Raghuram G & Zingales, Luigi, 1995. "What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-1460, December.
    31. Leland, Hayne E & Pyle, David H, 1977. "Informational Asymmetries, Financial Structure, and Financial Intermediation," Journal of Finance, American Finance Association, vol. 32(2), pages 371-387, May.
    32. Marsal-Llacuna, Maria-Lluïsa, 2018. "Future living framework: Is blockchain the next enabling network?," Technological Forecasting and Social Change, Elsevier, vol. 128(C), pages 226-234.
    33. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    34. Hamid Reza Khedmatgozar & Arezoo Shahnazi, 2018. "The role of dimensions of perceived risk in adoption of corporate internet banking by customers in Iran," Electronic Commerce Research, Springer, vol. 18(2), pages 389-412, June.
    35. Drasch, Benedict J. & Schweizer, André & Urbach, Nils, 2018. "Integrating the ‘Troublemakers’: A taxonomy for cooperation between banks and fintechs," Journal of Economics and Business, Elsevier, vol. 100(C), pages 26-42.
    36. Boot, Arnoud W. A., 2000. "Relationship Banking: What Do We Know?," Journal of Financial Intermediation, Elsevier, vol. 9(1), pages 7-25, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kaur, Manmeet & Ahmad, Wasim & Hari, K.S. & Kattumuri, Ruth, 2024. "FinTech entrepreneurial ecosystem in India: Role of incubators and accelerators," Global Finance Journal, Elsevier, vol. 60(C).
    2. Babaei, Golnoosh & Giudici, Paolo & Raffinetti, Emanuela, 2023. "Explainable FinTech lending," Journal of Economics and Business, Elsevier, vol. 125.
    3. Viviana D'Angelo & Francesco Cappa & Enzo Peruffo, 2023. "Walking the tightrope: Circular economy breadth and firm economic performance," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 30(4), pages 1869-1882, July.
    4. Lin, Ying & Yan, Xiaohan & Yang, Xiuyun, 2023. "Digital finance and enterprise investment efficiency in China," International Review of Financial Analysis, Elsevier, vol. 90(C).
    5. Francesco Fasano & Tiziana Rocca, 2024. "Does the bank-firm human relationship still matter for SMEs? The game-changing role of digitalization," Small Business Economics, Springer, vol. 62(1), pages 159-178, January.
    6. Maurizio La Rocca & Francesco Fasano & Tiziana La Rocca & Neha Neha, 2024. "Women in CEO duality and firm performance in Europe," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 28(1), pages 177-214, March.
    7. Chen, Wen & Wu, Weili & Zhang, Tonghui, 2023. "Fintech development, firm digitalization, and bank loan pricing," Journal of Behavioral and Experimental Finance, Elsevier, vol. 39(C).
    8. Fasano, Francesco & Rocca, Maurizio La & Cariola, Alfio & Passarelli, Mariacarmela, 2023. "Banking relationship and research spin-offs’ life cycle: The Italian experience," Research in International Business and Finance, Elsevier, vol. 65(C).
    9. Francesco Fasano & Maurizio La rocca, 2023. "Firm-specific determinants of internet services adoption," Economics Bulletin, AccessEcon, vol. 43(2), pages 1202-1207.
    10. Zhou, Bo & Wang, Qunwei, 2024. "FinTech matters in sustainable finance: Does it redistribute the supply of financial services?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 91(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Francesco Fasano & Tiziana Rocca, 2024. "Does the bank-firm human relationship still matter for SMEs? The game-changing role of digitalization," Small Business Economics, Springer, vol. 62(1), pages 159-178, January.
    2. A. Affuso, 2007. "Credit rationing and real assets: evidence from Italian panel data," Economics Department Working Papers 2007-EP09, Department of Economics, Parma University (Italy).
    3. Martinsson, Gustav, 2009. "Finance and R&D Investments - is there a debt overhang effect on R&D investments?," Working Paper Series in Economics and Institutions of Innovation 174, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    4. Gregory F Udell, 2015. "SME Access to Intermediated Credit: What Do We Know and What Don't We Know?," RBA Annual Conference Volume (Discontinued), in: Angus Moore & John Simon (ed.),Small Business Conditions and Finance, Reserve Bank of Australia.
    5. Marko Jakšič & Matej Marinč, 2019. "Relationship banking and information technology: the role of artificial intelligence and FinTech," Risk Management, Palgrave Macmillan, vol. 21(1), pages 1-18, March.
    6. Falavigna, Greta & Ippoliti, Roberto, 2023. "SMEs’ behavior under financial constraints: An empirical investigation on the legal environment and the substitution effect with tax arrears," The North American Journal of Economics and Finance, Elsevier, vol. 66(C).
    7. Miglo, Anton, 2022. "Theories of financing for entrepreneurial firms: a review," MPRA Paper 115835, University Library of Munich, Germany.
    8. Bu, Ya & Du, Xin & Wang, Yuting & Liu, Shuyu & Tang, Min & Li, Hui, 2024. "Digital inclusive finance: A lever for SME financing?," International Review of Financial Analysis, Elsevier, vol. 93(C).
    9. Gropp, Reint & Guettler, Andre, 2018. "Hidden gems and borrowers with dirty little secrets: Investment in soft information, borrower self-selection and competition," Journal of Banking & Finance, Elsevier, vol. 87(C), pages 26-39.
    10. Simon Cornée, 2014. "Soft Information and Default Prediction in Cooperative and Social Banks," Journal of Entrepreneurial and Organizational Diversity, European Research Institute on Cooperative and Social Enterprises, vol. 3(1), pages 89-103, June.
    11. Paola Bongini & Annalisa Ferrando & Emanuele Rossi & Monica Rossolini, 2021. "SME access to market-based finance across Eurozone countries," Small Business Economics, Springer, vol. 56(4), pages 1667-1697, April.
    12. Amarjit Gill & Craig Wilson, 2021. "Bank connections and small business performance: Evidence from Canadian survey data," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 5110-5134, October.
    13. Aitziber Olasolo, 2021. "Credit Risk Elements for Small and Medium-Sized Enterprises: The Case of Spain," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(2), pages 192-219.
    14. Drobetz, Wolfgang & Gounopoulos, Dimitrios & Merikas, Andreas & Schröder, Henning, 2013. "Capital structure decisions of globally-listed shipping companies," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 52(C), pages 49-76.
    15. Dirk Czarnitzki & Hanna Hottenrott & Susanne Thorwarth, 2011. "Industrial research versus development investment: the implications of financial constraints," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 35(3), pages 527-544.
    16. Ana Venâncio & João Jorge, 2022. "The role of accelerator programmes on the capital structure of start-ups," Small Business Economics, Springer, vol. 59(3), pages 1143-1167, October.
    17. Fabio Bertoni & María Ferrer & José Martí, 2013. "The different roles played by venture capital and private equity investors on the investment activity of their portfolio firms," Small Business Economics, Springer, vol. 40(3), pages 607-633, April.
    18. Andrés Rodríguez‐Pose & Roberto Ganau & Kristina Maslauskaite & Monica Brezzi, 2021. "Credit constraints, labor productivity, and the role of regional institutions: Evidence from manufacturing firms in Europe," Journal of Regional Science, Wiley Blackwell, vol. 61(2), pages 299-328, March.
    19. Mueller, Elisabeth, 2008. "How does owners' exposure to idiosyncratic risk influence the capital structure of private companies?," Journal of Empirical Finance, Elsevier, vol. 15(2), pages 185-198, March.
    20. Segarra Blasco, Agustí, 1958- & Teruel, Mercedes, 2010. "Are small firms more sensitive to financial variables?," Working Papers 2072/151623, Universitat Rovira i Virgili, Department of Economics.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jebusi:v:121:y:2022:i:c:s0148619522000261. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/journal-of-economics-and-business .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.