Simula@BI seminar: Rachel Nam, Goethe University, Frankfurt
Simula@BI invites Rachel Nam to give a talk about "Open Banking and Customer Data Sharing: Implications for FinTech Borrowers".
Open banking allows loan applicants to easily share payment data with prospective lenders during loan applications. In theory, this could broaden credit access by reducing information asymmetry but may also lead to first-degree price discrimination that exploits individuals’ preferences and behavioral traits. This paper studies the impact of open banking on borrowers and lends empirical support to the sizable benefits of data-sharing driven by improved inferences about borrower credit quality. Using granular loan application data from a leading German FinTech lender in consumer credit, I show that applicants with observably higher credit risk (with lower credit scores) are more likely to share data. Exploiting the variation of data sharing choice from observably similar applicants, I document that data sharing increases loan approval rates, reduces interest rates, and is associated with lower ex-post default rates. These findings suggest that open banking and data sharing can lead to a more efficient allocation of credit and reduced adverse selection.
About the speaker
Rachel Nam is a PhD Candidate from Goethe University Frankfurt, Graduate School of Economics, Finance, and Management (GSEFM), and a junior researcher at the Leibniz Institute for Financial Research SAFE. Broadly, she is interested in studying how technology transforms the provision of financial services and its impacts on consumers and firms. Her research interests lie primarily in FinTech, crypto, blockchain and decentralized finance, and household and consumer finance.
NB: This time the seminar takes place on a Monday!