Fintech Lenders : A Threat to Shadow Banks?

We study the personal loan segment of the consumer credit market using individual loan-level data covering fintech, non-banking financial companies, and traditional banks as lenders. We show that fintech lenders dominate the small-ticket loan and provide stiff competition to non-banking financial companies (NBFC) in this category. Traditional banks in the public and private sectors do not normally operate in the small ticket personal loan segments and hence do not face any threat from fintech lenders. Fintech borrowers are less likely to default compared to their NBFC counterparts with similar characteristics. Furthermore, fintech lenders tend to take calculated risks by lending to new-to-credit customers. During the global pandemic, fintech lenders provided much-desired liquidity to borrowers who needed smaller amounts of loans for sustenance