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Fintech Entry, Lending Market Competition, and Welfare

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  • Vives, Xavier
  • Ye, Zhiqiang

Abstract

We study fintech entry and how it affects competition, investment, and welfare in a spatial model. We find that fintechs with inferior monitoring efficiency can successfully enter because of their superior flexibility in pricing. It follows that fintech borrowers are more likely to default than bank borrowers with similar characteristics. Higher bank concentration leads to higher fintech loan volume and quality. Fintech entry may induce banks’ exit and reduce investment; however, it will increase investment if inter-fintech competition is intense enough. Fintech entry will improve welfare if fintechs have high monitoring efficiency and inter-fintech competition intensity is intermediate.

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  • Vives, Xavier & Ye, Zhiqiang, 2024. "Fintech Entry, Lending Market Competition, and Welfare," CEPR Discussion Papers 19245, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19245
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    1. Nicola Borri, 2025. "Corporate Finance in the Age of Fintech: Scenarios and Challenges," Papers 2503.18675, arXiv.org.

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    More about this item

    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
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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