{"title":"Bank-platform competition in the credit market","authors":"Sara Biancini , Marianne Verdier","doi":"10.1016/j.ijindorg.2023.103029","DOIUrl":null,"url":null,"abstract":"<div><p>We analyze the equilibrium in the credit market when a bank and a lending platform compete to offer credit to borrowers. The platform does not manage deposit accounts, but acts as an intermediary between the borrower and investor, offering a risky contract such that the investor is only reimbursed if the borrower is successful. We show that the platform business model of financial intermediation may generate unexpected effects in the credit market. In particular, investor participation in the platform sometimes decreases when the platform attracts better-quality borrowers. When it competes with the platform, depending on the respective distributions of borrower and investor types, the bank may expand the supply of credit to low-quality borrowers, or restrict it to high-quality borrowers. Bank-platform competition expands the total supply of credit, but has an ambiguous impact on borrower surplus, because some borrowers may have higher repayments.</p></div>","PeriodicalId":1,"journal":{"name":"Accounts of Chemical Research","volume":null,"pages":null},"PeriodicalIF":16.4000,"publicationDate":"2023-09-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Accounts of Chemical Research","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S016771872300098X","RegionNum":1,"RegionCategory":"化学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"CHEMISTRY, MULTIDISCIPLINARY","Score":null,"Total":0}
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Abstract
We analyze the equilibrium in the credit market when a bank and a lending platform compete to offer credit to borrowers. The platform does not manage deposit accounts, but acts as an intermediary between the borrower and investor, offering a risky contract such that the investor is only reimbursed if the borrower is successful. We show that the platform business model of financial intermediation may generate unexpected effects in the credit market. In particular, investor participation in the platform sometimes decreases when the platform attracts better-quality borrowers. When it competes with the platform, depending on the respective distributions of borrower and investor types, the bank may expand the supply of credit to low-quality borrowers, or restrict it to high-quality borrowers. Bank-platform competition expands the total supply of credit, but has an ambiguous impact on borrower surplus, because some borrowers may have higher repayments.
期刊介绍：
Accounts of Chemical Research presents short, concise and critical articles offering easy-to-read overviews of basic research and applications in all areas of chemistry and biochemistry. These short reviews focus on research from the author’s own laboratory and are designed to teach the reader about a research project. In addition, Accounts of Chemical Research publishes commentaries that give an informed opinion on a current research problem. Special Issues online are devoted to a single topic of unusual activity and significance.
Accounts of Chemical Research replaces the traditional article abstract with an article "Conspectus." These entries synopsize the research affording the reader a closer look at the content and significance of an article. Through this provision of a more detailed description of the article contents, the Conspectus enhances the article's discoverability by search engines and the exposure for the research.
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