05 Jun 2023

SAFE researcher awarded with Ph.D. Student Paper Award

Rachel Nam was honored at highly regarded conferences for her paper on open banking and data sharing

Lock on keyboard with a golden credit card

Rachel Nam, doctoral student in the Financial Markets research department at the Leibniz Institute for Financial Research SAFE, has received the distinguished 2023 Ph.D. Student Paper Award by the Journal of Financial Intermediation (JFI) and the Financial Intermediation Research Society (FIRS). She received the award during the 17th Annual FIRS Conference on 4 June 2023.

Her research paper, titled "Open Banking and Customer Data Sharing: Implications for FinTech Borrowers" explores the implications of open banking and customer-directed data sharing in the consumer credit market. Expressing her delight, Nam said, "It is indeed an honor to receive this award from JFI/FIRS. I am excited to contribute to the growing discussions on the impact of open banking and to continue exploring the intricacies of consumers’ data sharing choices and their impact.”

SAFE researcher Rachel Nam
SAFE researcher Rachel Nam

Nam’s paper analyzes the implications of open banking and data sharing for FinTech borrowers using extensive loan application data from one of the largest FinTech lenders in consumer credit in continental Europe. The study examines the characteristics of borrowers who choose to share their data and evaluates its impact on loan application outcomes. The findings reveal that lower-rating borrowers are more likely to share data, resulting in an increased likelihood of loan approval and reduced interest rates.

Figure 6: Loan acceptance rate by data sharing singup decision
Figure 6 from Nam's paper, showing the loan acceptance rate by data sharing signup decision by Schufa scoring from A-M. The acceptance rate of data sharing increases with a lower Schufa score wheras it lowers with a better score.

The research also highlights that open banking brings a new dimension to traditional credit scoring methods and allows for a more precise, individual-based risk assessment. Rachel Nam shows that traditional variables used in credit scoring explain less variation in loan application outcomes when customers opt to share their data, thus suggesting that open banking could be particularly beneficial for borrowers with thin credit files. These findings provide implications for regulators involved in implementing or expanding open banking policies.

Previously, Nam’s paper was recognized with the Best Ph.D. Student Paper Award at the Future of Financial Information conference.