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Big Techs vs Banks

Author

Listed:
  • Leonardo Gambacorta
  • Fahad Khalil
  • Bruno Maria Parigi

Abstract

We study an economy in which large technology companies, big techs, provide credit to firms operating on their platforms. We focus on two advantages that big techs have with respect to banks: better information on their clients and better enforcement of credit repayment since big techs can exclude a defaulting firm from their ecosystem. While big techs have both superior enforcement and complete and private information of the firm type big techs can encroach on banks' turf only if they guarantee some privacy to firms by tempering their drive to collect information about firm characteristics and leaving some rents to them. The way big techs share information i.e. by providing information publicly or in a private way entails different outcomes in terms of efficiency.

Suggested Citation

  • Leonardo Gambacorta & Fahad Khalil & Bruno Maria Parigi, 2022. "Big Techs vs Banks," BIS Working Papers 1037, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:1037
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    References listed on IDEAS

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    More about this item

    Keywords

    big techs; credit markets; privacy; information sharing;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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