This paper discusses concentration in consumer credit markets with a focus on fintech lenders and residential mortgages. We present evidence that shows that concentration among fintech lenders is significantly higher than that for bank lenders and other nonbank lenders. The data also show that the overall concentration in mortgage lending has declined between 2011 and 2019, driven mostly by a reduction in concentration among bank lenders. We present a simple model to show that changes in lender financial technology (interpreted as improvements in quality of loan services) explain more than 50 percent of the increase in fintech market shares and 43 percent of the increase in fintech concentration. This change in concentration in the fintech industry may have important implications for regulatory policy and financial stability.View the Full Working Paper
Market Concentration in Fintech
WP 23-11 – We study the market for residential mortgages from 2011 to 2019. We find that the market share of nonbanks doubled and that concentration among fintech lenders is high. We estimate that changes in quality/technology explain these facts.