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Payment Fintechs and Debt Enforcement

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  • Rishabh, Kumar

    (University of Basel)

  • Schäublin, Jorma

Abstract

Fintech payment companies acting as lenders possess a potential solution to weak debt enforcement. Their location in the payment chain yields them a senior position in the revenue stream of the borrowing merchant, as the payment company can deduct part of the merchant's sales it processes to amortize the loan. Our analysis of the transactions processed through a fintech company offering such sales-linked loans suggests that some borrowers discontinuously reduce sales processed through the company immediately after the loan disbursal to strategically default. We find that competition from other lenders and cash limits the effectiveness of this enforcement technology.

Suggested Citation

  • Rishabh, Kumar & Schäublin, Jorma, 2021. "Payment Fintechs and Debt Enforcement," Working papers 2021/02, Faculty of Business and Economics - University of Basel.
    • Handle: RePEc:bsl:wpaper:2021/02
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    References listed on IDEAS

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    More about this item

    Keywords

    Fintech lending; limited enforcement; sales manipulation; regression discontinuity;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • 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

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