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  • 2021
  • Working Paper

FinTech Lending and Cashless Payments

By: Boris Vallée, Pulak Ghosh and Yao Zeng
  • Format:Print
  • | Language:English
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Abstract

This study provides a new perspective to understand the rise and future potential of FinTech lending by linking it to the informational role of cashless payments. We uncover both theoretically and empirically a synergy between FinTech lending and cashless payments. FinTech lenders screen borrowers more efficiently when borrowers use more cashless payments that produce transferrable and verifiable information. Because borrowers expect lenders to rely on such payment information to screen them, a strategic consideration for a borrower to stand out of other borrowers then pushes more borrowers to adopt cashless payments. Using novel loan-level data from a large Indian FinTech lender who focuses on small-business lending, we find that a larger use of verifiable cashless payments (relative to cash) predicts a higher chance of loan approval, a lower interest rate, and lower default conditional on the interest rate obtained. These relationships are more pronounced for higher-quality firms. The uncovered synergy provides a plausible explanation for the joint rise of FinTech lending and cashless payments, and suggests an alternative banking model without a balance sheet or traditional banking relationships. Our findings also provide new policy implications on data sharing and open banking.

Keywords

Fintech; Lending; Payments; Data Sharing; Financing and Loans; Information Technology; Banks and Banking; Business Model

Citation

Vallée, Boris, Pulak Ghosh, and Yao Zeng. "FinTech Lending and Cashless Payments." Working Paper, February 2021.
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About The Author

Boris Vallee

Finance
→More Publications

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    • October 2021 (Revised April 2022)
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More from the Authors
  • Big Blue: Starting a Real Estate Firm By: Boris Vallée and Sean Bracken
  • Fintech to the (Worker) Rescue: Earned Wage Access and Employee Retention By: Jose Murillo, Boris Vallee and Dolly Yu
  • The Big Blue: Starting a Real Estate Firm By: Boris Vallee and Nikodem Szumilo
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