BigTech and the changing structure of financial intermediation

BIS Working Papers  |  No 779  | 
08 April 2019



This paper investigates the entry of big technology companies (BigTech) into financial services. It seeks to address three questions: What economic forces are driving this development? Do BigTech lenders have an information advantage compared with traditional data or processing methods, particularly when gauging creditworthiness? Do firms receiving BigTech credit perform differently from competitors?


The paper reports findings based on exclusive data from BigTech lenders to provide both an overview and new cross-country evidence on BigTech activities in finance. Analysis that draws on detailed data from China's Ant Financial and Latin America's Mercado Libre sheds light on key questions about this potentially game-changing development in the world of finance.


Differences in the development of FinTech credit reflect differences in income and financial market structure. The higher a country's income and the less competitive its banking system, the larger the FinTech credit volume. BigTech credit benefits even more from these factors. Looking at credit scoring, data from Mercado Libre show that credit models using machine learning and data from the e-commerce platform are better at predicting losses than traditional credit bureau ratings. Finally, using detailed micro data from Mercado Libre and Ant Financial, the authors find that small firms in Argentina that used BigTech credit offered more products and had higher sales than competitors, and that small firms in China also offered more products.



We consider the drivers and implications of the growth of "BigTech" in finance - ie the financial services offerings of technology companies with established presence in the market for digital services. BigTech firms often start with payments. Thereafter, some expand into the provision of credit, insurance, and savings and investment products, either directly or in cooperation with financial institution partners. Focusing on credit, we show that BigTech firms lend more in countries with less competitive banking sectors and less stringent regulation. Analysing the case of Argentina, we find support for the hypothesis that BigTech lenders have an information advantage in credit assessment relative to a traditional credit bureau. For borrowers in both Argentina and China, we find that firms that accessed credit expanded their product offerings more than those that did not. It is too early to judge the extent of BigTech's eventual advance into the provision of financial services. However, the early evidence allows us to pose pertinent questions that bear on their impact on financial stability and overall economic welfare.

JEL classification: E51, G23, O31

Keywords: BigTech, FinTech, credit markets, data, technology, network effects, regulation