What determines cross-country differences in fintech and bigtech credit markets?

Abstract

This study is an investigation of the determinants of the development of technology-driven alternative credit markets, that is, fintech and bigtech credit. Using a data sample from 94 countries from 2013–2019, we confirmed the relevance of the availability of credit data, both the traditional and alternative types, with the latter being known as the so-called “digital footprint.” Furthermore, we have provided evidence to confirm the positive role of strengthening Internet privacy protections in fostering the development of the fintech credit market, which may not necessarily be the case for the bigtech credit market. We have also shown that the growth of the fintech and bigtech credit market is preceded by a rising paytech services market. Furthermore, we have found that the development of fintech credit services is fostered by the strength of both principal institutions, like the rule of law, and credit-specific institutions, especially in terms of insolvency framework effectiveness, while, for the bigtech credit market, only the latter matters. Interestingly, we have also found that various national cultural profiles can boost the development of fintech and bigtech credit services. Lastly, we have shown that the fintech credit market develops faster in countries characterized by high levels of societal distrust toward banks and that the opposite seems to be the case with the bigtech credit market.