Working Paper
The authors model lending markets where bigtechs possess superior screening technology while banks enjoy funding-cost advantages. The optimal external collaboration occurs at the data level: bigtechs initially lend to risky borrowers before selling their credit histories to banks for subsequent financing.
This arrangement concentrates bigtechs’ screening incentives in the highrisk early lending phase while leveraging banks’ funding advantage thereafter. By serving as on-ramps to the financial system, bigtechs expand credit access to previously excluded borrowers.
Under certain conditions, restricting bigtech-bank integrations and encouraging external collaborations at the data level can improve welfare by preventing excessive screening investments.
