Date: 17 October 2024 (Thu)
Webinar
Webinar Series:
Capital Marketing Development: China and Asia
Open Banking and Digital Payments: Implications for Credit Access
17 October 2024, Thursday
10:00 am – 11:10 am, Thursday (Singapore Time, UTC+8)
[Open Banking and Digital Payments: Implications for Credit Access]
Open banking allows borrowers to share transaction data across intermediaries, potentially aiding marginal borrowers' credit access. However, it may also reduce incumbents' incentives to generate data, inadvertently limiting credit. The authors use India's launch of Unified Payment Interface (UPI), a digital payment infrastructure, in 2016 as a natural experiment to investigate the impact of open banking on credit access. This government-funded digital public infrastructure enabled users to create verifiable digital financial histories that could be shared across intermediaries with consumer consent, overcoming incumbents' disincentives in open banking. Their difference-in-differences design exploits local pincode-level variation in exposure to banks that adopted UPI early. Using several unique regulatory and proprietary datasets on the universe of consumer loans, the authors document an increase in consumer credit for both FinTech lenders and banks. Credit increased to subprime and new-to-credit customers and in financially excluded regions, consistent with financial inclusion. An alternate empirical design using the 4G launch of a major mobile phone operator that reduced internet data costs confirms our findings. Overall, open banking in the presence of digital public infrastructure aids broad-based credit access.
Speaker:
Shashwat ALOK, Associate Professor, Finance, Indian School of Business
Co-authors:
Pulak GHOSH, Professor, Decision Sciences, Indian Institute of Management, Bangalore and Fellow, ABFER
Nirupama KULKANI, Senior Research Director, CAFRAL
Manju PURI, J.B. Fuqua Professor of Finance, Duke University and Senior Fellow, ABFER
Discussant:
Ben CHAROENWONG, Associate Professor of Finance, INSEAD
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Event Website
https://abfer.org/events/abfer-events/webinar-series/384:webinarseries-cmd-36
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About the Webinar
Financial market development goes hand-in-hand with economic growth. The development of China's capital markets in terms of size, regulations, capability, and efficiency has been impressive. China may now even lead globally in some dimensions, notably e-payments systems. Yet, China's capital markets are still a work-in-progress facing both generic and unique challenges. Other Asian capital markets have even greater uneven development. Some in advanced Asian economies have acquired globally acclaimed reputation and capabilities while various regulatory and structural weaknesses dwarf others. Corporations and investors have been inclined to arbitrage cross-border regulatory and developmental gaps; so the very uneven status of capital markets across Asia is a policy issue for the governments in the entire region and perhaps globally. Analysing the positive and negative lessons in the functioning of Asia's capital markets, and identifying reforms and applications of technology that could further improve Asian capital markets' allocation efficiency, financial inclusion, and forewarning against reforms that might cause problems can benefit practitioners, policymakers and researchers, and can contribute significantly to overall prosperity.
The ABFER and the University of Chicago's Becker Friedman Institute China (BFI-China), in collaboration with National University of Singapore (NUS) Business School, Shanghai Advanced Institute of Finance (SAIF), The Chinese University of Hong Kong (CUHK) Department of Economics, CUHK-Shenzhen and Tsinghua University PBC School of Finance (Tsinghua PBCSF), hope to provide a virtual network to benefit researchers, policymakers, and practitioners from Asia and beyond.