Big tech credit and monetary policy transmission: micro-level evidence from China

BIS Working Papers  |  No 1084  | 
17 March 2023



Big tech credit has been growing rapidly in recent years. As they are less reliant on traditional collateral, big tech lenders can lend to borrowers that have been unserved or underserved by traditional financial institutions. As a source of disruption, big techs represent a "brave new world" for monetary policymakers, requiring them to re-evaluate the effectiveness of monetary policy transmission through these new lenders. This paper attempts some answers to such questions.


Despite the burgeoning literature on fintech, little is known about its implications for monetary policy transmission. This is partially due to a lack of data, as comparing big tech credit with bank credit while controlling for firm-level characteristics is not straightforward. Our paper bridges this gap by exploring monetary policy transmission mechanisms via big tech and conventional banks. We employ a unique data set covering the full borrowing history of sampled small and medium-sized enterprises that borrowed from a major big tech lender and from traditional banks in China.


We find that, in response to expansionary monetary policy, big tech lenders grant credit to more new borrowers than conventional banks do. In other words, when monetary policy eases, big tech lenders are more likely to establish new lending relationships with firms, as compared with traditional banks. The advantages of big tech lenders in information, monitoring and risk management are the potential mechanisms. That is, big tech credit tends to amplify the effectiveness of monetary policy transmission mainly via the extensive margin relative to traditional bank loans. In addition, monetary policy has a stronger impact on the real economy through big tech lending than via traditional bank loans.


This paper studies monetary policy transmission through BigTech and traditional banks. By comparing business loans made by a BigTech bank with those made by traditional banks, it finds that BigTech credit amplifies monetary policy transmission mainly through the extensive margin. Specifically, the BigTech bank is more likely to grant credit to new borrowers compared with conventional banks in response to expansionary monetary policy. The BigTech bank's advantages in information, monitoring, and risk management are the potential mechanisms. In addition, the usage of BigTech credit is associated with a stronger response of firms' sales in response to monetary policy.

JEL Classification: E52, G21, G23

Keywords: Financial technology, bank lending, monetary policy transmission