FinTech credit: Market structure, business models and financial stability implications

Report prepared by a Working Group established by the Committee on the Global Financial System and the Financial Stability Board.

FinTech credit refers to credit activity facilitated by electronic platforms. This usually involves borrowers being matched directly with investors, although some platforms use their own balance sheet to lend. FinTech platforms facilitate various forms of credit, including consumer and business lending, lending against real estate, and business invoice financing. There is also variation in the creditor base of FinTech credit platforms: some source funding mostly from retail investors, while others use significant funding from institutional investors, banks and securitisation markets.

Academic surveys on lending volumes in 2015 show considerable dispersion in FinTech credit market size across jurisdictions. In absolute terms, the largest FinTech credit market is China, followed at a distance by the United States and the United Kingdom. In general, FinTech credit is a small fraction of overall credit across jurisdictions, but it appears to be growing rapidly, and it may have much larger shares in specific market segments.

The report considers the implications for financial stability should FinTech credit grow to account for a significant share of overall credit. Potential benefits include access to alternative funding sources for borrowers, a lower concentration of credit in the traditional banking system and pressure on incumbent banks to be more efficient in their credit provision. At the same time, systemic risk concerns may arise, such as weaker lending standards and more procyclical credit provision in the economy. FinTech credit also poses challenges to the regulatory perimeter and authorities' monitoring of credit activity.

JEL classification: E51, G15, G21, G28

Keywords: Credit markets, peer-to-peer lenders, marketplace lenders, financial regulation