Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/215069 
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8067
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
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.
Subjects: 
technology
financial stability
IT adoption
non-performing loans
JEL: 
G21
G14
E44
D82
D83
Document Type: 
Working Paper
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