On Fintech and Financial Inclusion

The cost of financial intermediation has declined in recent years thanks to technology and increased competition in some parts of the finance industry. I document this fact and I analyze two features of new financial technologies that have stirred controversy: returns to scale and the use of big data and machine learning. I argue that the nature of fixed versus variable costs in robo-advising is likely to democratize access to financial services. Big data is likely to reduce the impact of negative prejudice in the credit market but it could reduce the effectiveness of existing policies aimed at protecting minorities