Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments May 11, 2022 erstellt
Description:
Using data from a main consumer credit bureau, we explore how fintech firms successfully compete in the unsecured personal loans (UPL) market. We find that fintech borrowers have comparable levels of banking relationships and credit bureau scores as bank borrowers, but fintech borrowers seem to have credit demands unmet by banks. Addressing such unmet demand, fintech firms primarily compete in this market with a product differentiation strategy by offering larger loans with longer terms than banks do, particularly in the low credit score segment.The main advantage fintech firms enjoy over banks is their ability to better identify potential defaulters and price accordingly. In all segments of the UPL market, fintech firms charge defaulters higher interest rates than banks do. However, fintech firms adopt different pricing strategies to non-defaulters in various UPL segments. Heavy reliance on the product differentiation strategy in the low score segment may have enabled fintech firms to charge higher interest rates to non-defaulters than banks. On the other hand, given the more direct competition in the high credit score segment, fintech firms charge lower interest rates to non-defaulters than banks do