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Home | Events Archive | Does FinTech Substitute for Banks? Evidence from the Paycheck Protection Program
Seminar

Does FinTech Substitute for Banks? Evidence from the Paycheck Protection Program


  • Series
    TI Finance Research Seminars
  • Speakers
    Isil Erel (The Ohio State University, United States)
  • Field
    Finance
  • Location
    Online
  • Date and time

    May 12, 2021
    16:00 - 17:00

If you are interested in participating in this particular seminar or want to receive information about this series seminar, please send us an email.

New technology promises to expand the supply of financial services to borrowers poorly served by the banking system. Does it succeed? We study the response of FinTech to financial services demand created by the introduction of the Paycheck Protection Program (PPP). We find that FinTech is disproportionately used in ZIP codes with fewer bank branches, lower incomes, and a larger minority share of the population, as well as in industries with little ex ante small-business lending. Its role in PPP provision is also greater in counties where the economic effects of the COVID-19 pandemic were more severe. To understand whether these differences arise because certain groups are switching from traditional banks to FinTech or if they are being newly served by FinTech, we study whether FinTech-enabled PPP loans were more widespread in areas with fewer traditional loans. Using the predicted responsiveness of traditional banks to the program as an instrument, we show that borrowers were more likely to get a FinTech-enabled PPP loan if they were located in ZIP codes where local banks were unlikely to originate PPP loans. Joint with Jack Liebersohn.

Read full paper here: https://www.nber.org/papers/w27659