Tech in Fin before FinTech: Blessing or Curse for Financial Stability? / Nicola Pierri, Yannick Timmer.

Format:

Book

Government document

Author/Creator:

Pierri, Nicola.

Contributor:

Timmer, Yannick.

Series:

IMF Working Papers; Working Paper ; No. 2020/014

IMF Working Papers

Language:

English

Physical Description:

1 online resource (43 pages)

Other Title:

Tech in Fin before FinTech

Place of Publication:

Washington, D.C. : International Monetary Fund, 2020.

Summary:

Motivated by the world-wide surge of FinTech lending, we analyze the implications of lenders’ information technology adoption for financial stability. We estimate bank-level intensity of IT adoption before the global financial crisis using a novel dataset that provides information on hardware used in US commercial bank branches after mapping them to their parent bank. We find that higher intensity of IT-adoption led to significantly lower non-performing loans when the crisis hit: banks with a one standard deviation higher IT-adoption experienced 10% lower non-performing loans. High-IT-adoption banks were not less exposed to the crisis through their geographical footprint, business model, funding sources, or other observable characteristics. Loan-level analysis indicates that high-IT-adoption banks originated mortgages with better performance and did not offload low-quality loans. We apply a simple text-analysis algorithm to the biographies of top executives and find that banks led by more “tech-oriented” managers adopted IT more intensively and experienced lower non-performing loans during the crisis. Our results suggest that technology adoption in lending can enhance financial stability through the production of more resilient loans.

Notes:

Description based on print version record.

ISBN:

9781513527826

1513527827