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Financial technology and relationship lending: Complements or substitutes?

Author

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  • Kutzbach, Mark J.
  • Pogach, Jonathan

Abstract

We describe the dimensions along which bank technologies differ from fintech competitors and construct a novel measure of a bank’s technology based upon its overlap with fintech firms in terms of granular product installation data. A one standard deviation increase in our financial technology measure is associated with an 8.3 percentage point increase in Paycheck Protection Program (PPP) loans in 2020Q2. We show that smaller banks benefited more from marginal technology gains, that technology facilitated out-of-area lending, and that technology complemented small banks’ branch-based in-area lending. In a difference-in-differences analysis, we show an outsized increase in small business lending growth in 2020 for high tech small banks relative to their peers.

Suggested Citation

  • Kutzbach, Mark J. & Pogach, Jonathan, 2024. "Financial technology and relationship lending: Complements or substitutes?," Journal of Financial Intermediation, Elsevier, vol. 59(C).
    • Handle: RePEc:eee:jfinin:v:59:y:2024:i:c:s1042957324000299
    DOI: 10.1016/j.jfi.2024.101101
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    More about this item

    Keywords

    Banking; Fintech; Technology; Paycheck Protection Program; COVID-19; Commercial & industrial lending; Small business lending;
    All these keywords.

    JEL classification:

    • 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
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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