The Role of Bank-Fintech Partnerships in Creating a More Inclusive Banking System – Beragampengetahuan

Slice an Indian fintech company and North East Small Finance Bank merged yesterday.

Rajan Bajaj, founder and CEO, Slice said: “We’re grateful to the RBI for entrusting us with this immense responsibility. This approach allows us to serve a wider audience, including those often overlooked. We will further strengthen our risk underwriting through the use of technology and data. We see this as an opportunity to build a highly inclusive and responsible bank, underpinned by robust risk management and strong governance”.

These partnerships have allowed banks to access more information on consumers through data aggregation, artificial intelligence/machine learning (AI/ML), and other tools. The authors explore the demographics of consumers targeted by banks that have entered into such partnerships. Specifically, the authors test whether banks are more likely to extend credit offers (by mail) and/or credit originations to consumers who would have otherwise been deemed high risk either because of low credit scores or lack of credit scores altogether.

The analysis uses data on credit offers based on a survey conducted by Mintel, as well as data on credit originations based on the Federal Reserve’s Y-14M reports. Additionally, the authors analyze a unique data set of partnerships between fintech firms and banks compiled by CB Insights to identify the relevant partnerships.

The results indicate that banks are more likely to offer credit cards and personal loans to the credit invisible and below-prime consumers — and are also more likely to grant larger credit limits to those consumers — after the partnership period.

Similarly, the authors find that fintech partnerships result in banks being more likely to originate mortgage loans to nonprime homebuyers and that they increase the mortgage loan amounts that banks grant to nonprime buyers as well. Overall, the authors find that these partnerships could help to move us toward a more inclusive financial system.

This entry was posted on October 5, 2023 at 3:39 pm and is filed under Academic research & research papers, Central Banks / Monetary Policy, Financial Markets/ Finance, Indian Economy/Financial Markets. You can follow any responses to this entry through the RSS 2.0 feed.
You can leave a response, or trackback from your own site.