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Platform lending and innovation

Author

Listed:
  • Leonardo Gambacorta
  • Leonardo Madio
  • Bruno Maria Parigi

Abstract

We analyse the impact of platform lending on innovation and e-commerce vendors' surplus. The platform generates revenues from both lending and marketplace fees, and can use lending to price discriminate vendors, thereby leading to higher marketplace fees and below-market interest rates. While platform lending can encourage innovation by providing access to subsidised credit, it can harm vendors who do not have financial needs. A sufficient condition for platform lending to be welfare-enhancing is that innovators would not receive funding from banks otherwise. However, if innovators would receive funding from banks, platform lending may reduce the overall vendor surplus. Cream skimming arises when the platform has better information than the bank about the prospects of the innovators' projects. To address the potential negative effects of platform lending on vendors' surplus, we also explore the impact of different regulatory instruments.

Suggested Citation

  • Leonardo Gambacorta & Leonardo Madio & Bruno Maria Parigi, 2023. "Platform lending and innovation," BIS Working Papers 1142, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:1142
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    References listed on IDEAS

    as
    1. Hongchang Wang & Eric M. Overby, 2022. "How Does Online Lending Influence Bankruptcy Filings?," Management Science, INFORMS, vol. 68(5), pages 3309-3329, May.
    2. Zhu Wang & Julian Wright, 2017. "Ad valorem platform fees, indirect taxes, and efficient price discrimination," RAND Journal of Economics, RAND Corporation, vol. 48(2), pages 467-484, May.
    3. Bouvard, Matthieu & Casamatta, Catherine & Xiong, Rui, 2022. "Lending and monitoring: Big Tech vs Banks," TSE Working Papers 22-1386, Toulouse School of Economics (TSE).
    4. Beck, Thorsten & Gambacorta, Leonardo & Huang, Yiping & Li, Zhenhua & Qiu, Han, 2022. "Big techs, QR code payments and financial inclusion," CEPR Discussion Papers 17297, C.E.P.R. Discussion Papers.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    platform lending; big tech; online platforms; credit; innovation;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software
    • 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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