Finance Webinar（2020-10)

Topic: When FinTech Competes for Payment Flows

Speaker: Uday Rajan, University of Michigan

Time: Wednesday, 10 June, 10:00-11:30 Beijing Time

Location: Microsoft Teams Online conference room

Abstract:

We study the impact of FinTech competition in payment services when banks rely on consumers' payment data to obtain information about their credit quality. Competition from FinTech payment providers disrupts this information spillover, reducing the bank's loan quality and profit. FinTech competition benefits consumers with weak bank affinity (financial inclusion improves), but may hurt consumers with strong bank affinity. We consider three regimes in which payment information flows back into the credit market: FinTech lending, data sales, and consumer data portability. All three regimes improve the quality of loans, although their effects for bank profit and consumer welfare are ambiguous. Our results highlight the important and complex trade-off between consumer welfare and the stability of banks following FinTech competition in payment.

Introduction:

Uday Rajan is David B. Hermelin Professor of Business Administration and Professor of Finance at Stephen M. Ross School of Business, University of Michigan.Uday Rajan's research focuses on informational frictions such as adverse selection and moral hazard and their effect on market transactions, with recent work on the role of credit ratings in the financial markets and on bank regulation. Uday was a Vice President of Fixed Income Research at Drexel Burnham Lambert in the late 1980s, and received a PhD in Economics from Stanford University in 1995. His research has been published in theAmerican Economic Review, Journal of Finance, Journal of Financial EconomicsandReview of Financial Studies. He has received the GSAM award for the best paper in theReview of Financeand the NYSE award for the best paper on equity trading at the WFA meetings. He is an Editor of theReview of Corporate FinanceStudies and an Associate Editor of theJournal of Finance, and has been an editorial review board member atMarketing Scienceand an Associate Editor atManagement Science. He is a former President of theFinance Theory Groupand a Director of theWestern Finance Association. He has received MBA teaching awards at the Ross School and at Carnegie Mellon, and a PhD teaching award at the Ross School.

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