【 Webinar Series - Innovation, Productivity, and Challenges in the Digital Era: Asia and Beyond 】

FinTech Lending and Cashless Payments

Date: 5 Jan 2022 (Wed)

Time: 10am – 11:10am (Hong Kong Time, UTC+8)

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. The authors 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, the authors 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. The authors’ findings also provide new policy implications on data sharing and open banking.

Speaker:

Yao ZENG
Assistant Professor of Finance, Wharton School University of Pennsylvania

Co-authors:
Pulak GHOSH, Professor in the Decision Sciences Area, Indian Institute of Management Bangalore

Boris VALLEE, Torstein Hagen Associate Professor of Business Administration, Harvard Business School, Harvard University

Discussant:

Tiffany TSAI
Assistant Professor, Department of Economics, National University of Singapore

About the Webinar

Artificial Intelligence (AI), Big Data, multilevel neural nets, the Internet of Things (IoT) and other digital technologies are transforming the world. They are strengthening innovation and productivity and innovation by rendering the future more predictable and reshaping individual, business, social, and government behavior. Asia leads the world in some of these endeavors, e.g., digital platforms. The OECD lists 40% of big new digital technologies as Asian. Almost half of global digital platform business-to-consumer revenues are Asian, versus only 22% from the U.S. and 12% from the Eurozone. Profound new policy challenges arising, in consequence, include: shifting skills demanded in labor markets and “digital divide” inequality, (ii) AI expanding financial inclusion or encoding inequality, expanding or obscuring accountability, increasing transparency or obscuring amoral decision-making, and (iii) digital privacy, unsanctionable on-line libel, misinformation, manipulation, and propaganda. The ABFER, therefore, plans a monthly e-seminar series spotlighting important new research, particularly the Asia-pacific related, into these issues and providing “state-of-the-art” overviews by prominent scholars. We hope policy makers and practitioners will find the e-seminars helpful and will alert researchers to issues needing attention.

Collaborating Organizers

ABFER, CUHK-Zhejiang University Joint Research Center for Digital Economy, The Chinese University of Hong Kong (CUHK) Department of Economics, Center for Internet Development and Governance, Tsinghua University School of Economics and Management (Tsinghua SEM)