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Customer Data Access and Fintech Entry: Early Evidence from Open Banking

Author

Listed:
  • Babina, Tania
  • Bahaj, Saleem
  • Buchak, Greg
  • De Marco, Filippo
  • Foulis, Angus
  • Gornall, Will
  • Mazzola, Francesco
  • Yu, Tong

Abstract

Open banking (OB) empowers bank customers to share transaction data with fintechs and other banks. 49 countries have adopted OB policies. Consumer trust in fintechs predicts OB policy adoption and adoption spurs investment in fintechs. UK microdata shows that OB enables: i) consumers to access both financial advice and credit; ii) SMEs to establish new fintech lending relationships. In a calibrated model, OB universally improves welfare through entry and product improvements when used for advice. When used for credit, OB promotes entry and competition by reducing adverse selection, but higher prices for costlier or privacy-conscious consumers partially offset these benefits.

Suggested Citation

  • Babina, Tania & Bahaj, Saleem & Buchak, Greg & De Marco, Filippo & Foulis, Angus & Gornall, Will & Mazzola, Francesco & Yu, Tong, 2024. "Customer Data Access and Fintech Entry: Early Evidence from Open Banking," CEPR Discussion Papers 18797, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18797
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    More about this item

    Keywords

    open banking; data access; entrepreneurship; Financial regulation;
    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
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G50 - Financial Economics - - Household Finance - - - General
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O36 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Open Innovation
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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