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The Sunday Paper – What Do Two Million Credit Lines Say About the FinTech Fragility?

Still wondering why Ant was so abruptly pulled?

The paper highlighted today provides essential-reading on what may have been a major component of the regulatory authorities’ thinking.

Zhengyang Bao and Difang Huang, both from Australia’s Monash University have produced the first paper, probably anywhere in the world*, that looks at how the exogenous shock of COVID-19 has affected FinTech loan delinquency.

[*The study is China specific but they speculate, and it makes intuitive sense to agree, findings are likely to repeat elsewhere.]

The paper is an easy read and for those with a close interest in either the Ant or FinTech in general (Chinese or otherwise) it should be carefully perused.

For those just interested in the executive summary, here it is:

  1. Pre-COVID delinquency by FinTech borrowers and bank borrowers was very similar (a highlight of many a FinTech pitch-book no doubt?)
  2. FinTech borrowers’ delinquency TRIPLED after the pandemic
  3. There was NO significant increase in bank borrowers’ delinquency over the same period
  4. An analysis of FinTech borrowers reveals (surprise? not) these people typically have less capacity to withstand financial shocks and are more likely to take loans from FinTech companies than banks
  5. Borrowers with both FinTech and bank loans outstanding were way more likely to default on the former before the latter

You can access the paper in full via the following link FinTech Fragility.

Happy Sunday.

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