The changing face of consumer credit: Evidence from a big tech platform in China

Abstract

We investigate the changi pattern of consumer credit usage following a large, adverse shock. Using a unique dataset comprising the consumption, payment, and investment activities of nearly 100,000 users of a leading Big Tech platform in China, we find that consumers who have access to both FinTech and traditional bank credit reduce their bank credit card usage while increasing their FinTech credit usage. Moreover, FinTech credit works as a complement rather than a substitute for traditional bank credit on the same Big Tech platform, as the amount of FinTech-credit-enabled payments is much lower. This impact is more pronounced among female consumers, younger consumers, and consumers who invest more money in Big Tech platform. Hence, the rise of FinTech credit is potentially driven by (1) the consumption downgrading (i.e., shifting from large amounts and service consumption to small amounts and daily necessity consumption) in the post-COVID era, when people’s income and growth expectations have been reduced and the uncertainties they face have increased, and (2) payment convenience, as people become less likely to access banks after the outbreak of COVID. Our findings provide novel evidence regarding the relationship between FinTech and traditional bank credit and the interplay between consumption and consumer credit, with implications for consumption resilience in the post-COVID-19 era.