The Leibniz Institute SAFE organizes a brown bag seminar on
Open Banking and Customer Data Sharing: Implications for FinTech Borrowers
Rachel Nam (Leibniz Institute SAFE)
Abstract: With open banking, consumers take greater control over their own financial data and decide who to share their data with. Using a rich set of loan application data from the largest German FinTech lender in consumer credit, this paper studies what characterizes borrowers who share data and assesses its impact on loan application outcomes. I show that riskier borrowers share data relatively more readily and it can increase the probability of loan approval by up to 9 percentage points, and lead to a reduction in interest rates by around 2 percentage points. Effects, however, vary across borrowers with different credit score profiles. I also find that standard variables used in credit scoring explain substantially less variation in loan application outcomes when customers share data. Overall, these findings suggest that open banking improves financial inclusion, and also provide policy implications for regulators engaged in the adoption or extension of open banking policies.