{
  "title": "Tech in Fin before FinTech: Blessing or Curse for Financial Stability?",
  "publication": "IMF Working Papers, January 17, 2020",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2020/01/17/tech-in-fin-before-fintech-blessing-or-curse-for-financial-stability-48797",
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  "summary": "Motivated by the world-wide surge of FinTech lending, we analyze the implications of lenders’ information technology adoption for financial stability.",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Motivated by the world-wide surge of FinTech lending, the paper analyzes implications of lenders’ information technology adoption for financial stability.\n- Main conclusion: technology adoption in lending can enhance financial stability through the production of more resilient loans."
    },
    {
      "heading": "Key findings",
      "content": "- Banks with a one standard deviation higher IT-adoption experienced 10% lower non-performing loans when the global financial crisis hit.\n- High-IT-adoption banks were not less exposed to the crisis through their:\n  - geographical footprint,\n  - business model,\n  - funding sources,\n  - or other observable characteristics.\n- Loan-level analysis:\n  - High-IT-adoption banks originated mortgages with better performance.\n  - High-IT-adoption banks did not offload low-quality loans.\n- Management analysis:\n  - A simple text-analysis algorithm applied to biographies of top executives indicates banks led by more “tech-oriented” managers adopted IT more intensively and experienced lower non-performing loans during the crisis."
    },
    {
      "heading": "Methods and data",
      "content": "- Estimation of bank-level intensity of IT adoption before the global financial crisis using a novel dataset that provides information on hardware used in US commercial bank branches after mapping them to their parent bank.\n- Use of loan-level mortgage performance data to assess origination quality and offloading behavior.\n- Application of a simple text-analysis algorithm to executive biographies to construct a measure of managerial “tech-orientation.”"
    },
    {
      "heading": "Implications for financial stability and policy",
      "content": "- Evidence suggests IT adoption in lending can be a stabilizing force by producing loans that are more resilient in a crisis.\n- Managerial tech-orientation appears to be a driver of IT adoption and associated stability benefits, implying potential policy interest in managerial incentives and governance related to technology investment.\n- Findings caution against assuming that technology-driven lenders are necessarily more exposed to crisis risk via observable channels such as geography, business model, or funding; the stabilizing loan-quality channel is empirically important.\n\nNicola Pierri, Yannick Timmer. \"Tech in Fin before FinTech: Blessing or Curse for Financial Stability?\", IMF Working Paper No. 2020/014 (January 17, 2020).\n\n---\n\n Content in this bundle\n\n- Working Paper\n  - Working Paper (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Working Paper (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/wp/issues/2020/01/17/tech-in-fin-before-fintech-blessing-or-curse-for-financial-stability-48797"
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    "Authors: Nicola Pierri, Yannick Timmer",
    "Published: January 17, 2020",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781513519258.001",
    "Motivated by the world-wide surge of FinTech lending, the paper analyzes implications of lenders’ information technology adoption for financial stability.",
    "Main conclusion: technology adoption in lending can enhance financial stability through the production of more resilient loans.",
    "Banks with a one standard deviation higher IT-adoption experienced 10% lower non-performing loans when the global financial crisis hit.",
    "High-IT-adoption banks were not less exposed to the crisis through their:",
    "Loan-level analysis:",
    "Management analysis:",
    "Estimation of bank-level intensity of IT adoption before the global financial crisis using a novel dataset that provides information on hardware used in US commercial bank branches after mapping them to their parent bank.",
    "Use of loan-level mortgage performance data to assess origination quality and offloading behavior.",
    "Application of a simple text-analysis algorithm to executive biographies to construct a measure of managerial “tech-orientation.”",
    "Evidence suggests IT adoption in lending can be a stabilizing force by producing loans that are more resilient in a crisis.",
    "Managerial tech-orientation appears to be a driver of IT adoption and associated stability benefits, implying potential policy interest in managerial incentives and governance related to technology investment.",
    "Findings caution against assuming that technology-driven lenders are necessarily more exposed to crisis risk via observable channels such as geography, business model, or funding; the stabilizing loan-quality channel is empirically important.",
    "**Working Paper**"
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