FinTech Lending and Debt Spiral

Speaker：Shi Jin, Professor, Zhongnan University of Economics and Law

Host：Luo Danglun , Professor, Lingnan College

Time and Date：15:00, Oct. 19, 2023

Venue：Wong Ping-Lay Conference Room, Lingnan Hall (203) 

Language: English + Chinese

Abstract：

We examine whether and how consumers can be trapped in debt spirals in fintech lending markets. With alternative data sources, fintech lenders may target and provide easy-access credit products to new customers. We find that after obtaining a focal fintech lender’s loan approval, borrowers receive more promotional messages from other fintech lending platforms, causing greater tendencies of subsequent new borrowing, personal expenditure, loan delinquency, and experiencing adverse social outcomes. This effect is stronger for borrowers with low financial literacy, limited credit access, and weak social insurance. Taken together, we document the economic and social consequences of fintech consumers’ overborrowing behavior.