Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/266685 
Authors: 
Year of Publication: 
2022
Series/Report no.: 
SAFE Working Paper No. 364
Publisher: 
Leibniz Institute for Financial Research SAFE, Frankfurt a. M.
Abstract: 
With open banking, consumers take greater control over their own financial data and share it at their discretion. Using a rich set of loan application data from the largest German FinTech lender in consumer credit, this paper studies what characterizes borrowers who share data and assesses its impact on loan application outcomes. I show that riskier borrowers share data more readily, which subsequently leads to an increase in the probability of loan approval and a reduction in interest rates. The effects hold across all credit risk profiles but are the most pronounced for borrowers with lower credit scores (a higher increase in loan approval rate) and higher credit scores (a larger reduction in interest rate). I also find that standard variables used in credit scoring explain substantially less variation in loan application outcomes when customers share data. Overall, these findings suggest that open banking improves financial inclusion, and also provide policy implications for regulators engaged in the adoption or extension of open banking policies.
Subjects: 
Open banking
FinTech
Marketplace lending
P2P lending
Big data
Customer data sharing
Data access
Data portability
Digital footprints
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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