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Fintech, Credit Market Competition, and Bank Asset Quality

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  • Ping-Lun Tseng

    (National Taipei University of Business)

  • Wen-Chung Guo

    (National Taipei University)

Abstract

This study explores bank screening incentives under credit market competition between traditional banks and a Fintech startup. The bank screening incentives increase with the cost of the Fintech startup’s screening technology, decrease with the performance of that technology, and increase with the cost of entrepreneurs’ conveying information to the Fintech startup. However, when the preparation cost of entrepreneurs applying to the banks for loans falls with Fintech, the bank screening incentives are eroded; while when the bank screening cost decreases with Fintech, those incentives are enhanced. We also discuss the role of capital regulation and several extensions for robustness.

Suggested Citation

  • Ping-Lun Tseng & Wen-Chung Guo, 2022. "Fintech, Credit Market Competition, and Bank Asset Quality," Journal of Financial Services Research, Springer;Western Finance Association, vol. 61(3), pages 285-318, June.
    • Handle: RePEc:kap:jfsres:v:61:y:2022:i:3:d:10.1007_s10693-021-00363-y
    DOI: 10.1007/s10693-021-00363-y
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    Cited by:

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    2. António Porfírio, José & Augusto Felício, José & Carrilho, Tiago, 2024. "Factors affecting digital transformation in banking," Journal of Business Research, Elsevier, vol. 171(C).
    3. Onorato, Grazia & Pampurini, Francesca & Quaranta, Anna Grazia, 2024. "Lending activity efficiency. A comparison between fintech firms and the banking sector," Research in International Business and Finance, Elsevier, vol. 68(C).
    4. Zhao, Yang & Goodell, John W. & Wang, Yong & Abedin, Mohammad Zoynul, 2023. "Fintech, macroprudential policies and bank risk: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 87(C).
    5. Doina Caragea & Theodor Cojoianu & Mihai Dobri & Andreas Hoepner & Oana Peia & Davide Romelli, 2024. "Competition and Innovation in the Financial Sector: Evidence from the Rise of FinTech Start-ups," Journal of Financial Services Research, Springer;Western Finance Association, vol. 65(1), pages 103-140, February.
    6. Choudhary, Priya & Thenmozhi, M., 2024. "Fintech and financial sector: ADO analysis and future research agenda," International Review of Financial Analysis, Elsevier, vol. 93(C).

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    More about this item

    Keywords

    Fintech; Banks; Credit market competition; Screening incentives; Capital regulation;
    All these keywords.

    JEL classification:

    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • 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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