Digital Disruptors at the Gate. Does FinTech Lending Affect Bank Market Power and Stability?

This paper examines the effect of FinTech lending on the market power and stability of incumbent banks. Using an international sample of 6,309 banks during the period 2013-2019, our results show that the volume of credit provided by FinTech lenders negatively affects bank market power and stability. This negative effect is less relevant in countries with greater protection of creditor rights. We also find that the impact of FinTech lending on bank stability is partially channeled by the effect of FinTech credit on the market power of incumbent banks. Our main results – lower bank market power and stability – are also observed at the country level, after addressing potential endogeneity concerns related to FinTech lending and several robustness checks