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Privacy regulation and fintech lending

Author

Listed:
  • Sebastian Doerr
  • Leonardo Gambacorta
  • Luigi Guiso
  • Marina Sanchez del Villar

Abstract

We find that, following the introduction of the CCPA, loan applications to fintechs increase by significantly more than those to traditional banks, leading to an increase in fintechs' market share by up to 19%. This increase can be attributed to applicants' increased willingness to share their data. Fintechs, taking advantage of this data, expand their utilisation of information beyond traditional credit scores during the application process. Consequently, they engage in more personalised pricing and reject a larger proportion of applications. These findings suggest that fintechs enhance their screening process, leading to an improvement in the quality of their average borrower. As a result, fintechs are able to offer significantly lower loan rates than banks can following the CCPA's implementation. In sum, the CCPA has benefited consumers by providing fintech lenders, equipped with advanced screening technology, with improved access to data.

Suggested Citation

  • Sebastian Doerr & Leonardo Gambacorta & Luigi Guiso & Marina Sanchez del Villar, 2023. "Privacy regulation and fintech lending," BIS Working Papers 1103, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:1103
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    Cited by:

    1. Donato Masciandaro, 2023. "Politicians, Trust and Financial Literacy: When Do Politicians Care?," BAFFI CAREFIN Working Papers 23206, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.
    2. Chen, S. & Doerr, S. & Frost, J. & Gambacorta, L. & Shin, H.S., 2023. "The fintech gender gap," Journal of Financial Intermediation, Elsevier, vol. 54(C).
    3. Sebastian Doerr & Jon Frost & Leonardo Gambacorta & Vatsala Shreeti, 2023. "Big techs in finance," BIS Working Papers 1129, Bank for International Settlements.

    More about this item

    Keywords

    data privacy; data sharing; fintech; privacy regulation; CCPA;
    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

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