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FinTech vs. Bank: The impact of lending technology on credit market competition

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  • Serfes, Konstantinos
  • Wu, Kejia
  • Avramidis, Panagiotis

Abstract

Does the recent proliferation of technology in lending process have an impact on business loan market competition? Using a theoretical model that assumes heterogeneity in lenders’ screening abilities and borrowers’ investment horizons, we show that FinTech (Traditional) lenders primarily supply unsecured (asset-backed) loans to borrowers with short-term (long-term) projects. The model builds on the interplay between screening ability and collateral requirements to characterize the competition between two ex-ante symmetric lenders. Lenders use screening technology and collateral requirements to mitigate competition and restrict the supply of credit through an endogenous segmentation of the loan market. As information technology improves, the effect on credit supply and equilibrium interest rates becomes more nuanced and depends on the market segment. The results offer a supply-side explanation for the growth of unsecured lending.

Suggested Citation

  • Serfes, Konstantinos & Wu, Kejia & Avramidis, Panagiotis, 2025. "FinTech vs. Bank: The impact of lending technology on credit market competition," Journal of Banking & Finance, Elsevier, vol. 170(C).
    • Handle: RePEc:eee:jbfina:v:170:y:2025:i:c:s0378426624002528
    DOI: 10.1016/j.jbankfin.2024.107338
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    Cited by:

    1. Wang, Qiqi & He, Yunxin, 2025. "Platform-based fintech and bank loan maturity structure: Evidence from Chinese commercial banks," Finance Research Letters, Elsevier, vol. 86(PE).
    2. Brei, Michael & Cornelli, Giulio & Gambacorta, Leonardo & Hofmann, Boris, 2026. "The Digitalisation of Banking and Social Media: Implications for Deposit Pricing," CEPR Discussion Papers 21609, Centre for Economic Policy Research.
    3. Yarong Shi & Yahan Jin, 2025. "How Fintech Impacts Urban Economic Resilience: A Perspective on the Empowerment of Digital Inclusive Finance," Sustainability, MDPI, vol. 17(17), pages 1-24, August.

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    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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