Fintech and big tech credit: a new database
Around the world, credit markets are undergoing profound transformation. While banks, credit unions and other traditional lenders remain the main source of finance in most economies, with capital markets playing an important role in some cases, new intermediaries have recently emerged. In particular, digital lending models such as peer-to-peer and market lending have grown in many economies over the past decade. These types of credit, facilitated by online platforms rather than traditional banks or loan companies, are called “fintech credit”. In addition, in recent years, many large companies whose main activity is technology (big techs) have entered the credit markets, providing “big tech credit” either directly or in partnership with financial institutions. .
Information on the size and characteristics of fintech and big tech credit is scarce. In this article, we collate and update the available data on fintech and big tech credit volumes for 79 countries around the world during the period 2013-19. The database is made available as a resource for researchers, policy makers and practitioners. We answer the questions: How big are the fintech and big tech credit markets, both in absolute terms and relative to all credit markets? What economic and institutional factors are driving their growth and adoption? How far could they get big and important in the future?
We note that in 2019, fintech and big tech credit (together “total alternative credit”) reached nearly $ 800 billion worldwide. Large technology credit has grown particularly rapidly in Asia (China, Japan, Korea and Southeast Asia) and in some countries in Africa and Latin America. In contrast, fintech credit volumes declined in 2018-19 due to market and regulatory developments in China. Outside of China, fintech credit continues to grow. We find that these alternative forms of credit are more developed in countries with a higher GDP per capita (at a decreasing rate), where the margins of the banking sector are higher and where banking regulations are less strict. Fintech credit is also more developed where there are fewer bank branches per capita. We find that these alternative forms of credit are more developed where the ease of doing business is greater, the disclosure of investor protection and the efficiency of the judicial system are more advanced, the bank credit / deposit ratio is lower. , and where bonds and equity markets are more developed. Overall, fintech and big tech credits appear to complement, rather than substitute for, other forms of credit, and can increase overall access to credit.
Fintechs and big tech platforms have extended their lending across the world. We estimate that the flow of these new forms of credit reached USD 223 billion and USD 572 billion respectively in 2019. China, the United States and the United Kingdom are the largest markets for fintech credit. Big tech credit is growing rapidly in China, Japan, Korea, Southeast Asia, and some countries in Africa and Latin America. Panel regressions between countries show that these loans are more developed in countries with higher GDP per capita (at a decreasing rate), where the profit margins of the banking sector are higher and where banking regulations are less strict. FinTech credit is more important where there are fewer bank branches per capita. We also find that fintech and big tech credit are more developed where the ease of doing business is greater, and the disclosure of investor protection and the efficiency of the judicial system are more advanced, the bank credit / deposit is lower and where bond and stock markets are more developed. Overall, alternative credit appears to complement other forms of credit rather than substitute for them.
JEL codes: E51, G23, O31
Keywords: fintech, big tech, credit, data, technology, digital innovation