Shadow Banking in a Crisis: Evidence from FinTech During COVID-19

Zhengyang Bao and Difang Huang

We analyze lending by traditional and FinTech lenders during COVID-19. Comparing samples of FinTech and bank loan records across the outbreak, we find that FinTech companies are more likely to expand credit access to new and financially constrained borrowers after the start of the pandemic. However, this increased credit provision may be unsustainable; the delinquency rate of FinTech loans triples after the outbreak, but there is no significant change in bank loans. Borrowers holding both loan types prioritize bank loan repayments. These results shed light on the benefits of shadow banking and the potential fragility of such institutions.