The Bank of International Settlement (BIS) published today a report on FinTech credit, that is, credit activity facilitated by electronic platforms such as peer-to-peer lenders. The report aims at shed light on the significant uncertainty as to how FinTech credit markets will develop and how they will affect the nature of credit provision and the traditional banking
sector.

The study draws on public sources and ongoing work in member institutions to analyse the functioning of FinTech credit markets, including the size, growth and nature of activities. It also assesses the potential microfinancial benefits and risks of these activities, andconsiders the possible implications for financial stability in the event that FinTech credit should
grow to account for a significant share of overall credit.

Conduct and prudential regulatory policies in selected countries are also outlined. The report provides several key messages. The nature of FinTech credit activity varies significantly across and within countries, due to heterogeneity in the business models of FinTech credit platforms. Although FinTech credit markets have expanded at a fast pace over recent years, they currently remain small in size relative to credit extended by traditional intermediaries.

A bigger share of FinTech-facilitated credit in the financial system could have both financial stability benefits and risks in the future, including access to alternative funding sources in the economy and efficiency pressures on incumbent banks, but also the potential for weaker lending standards and more procyclical credit provision in the economy.

The emergence of FinTech credit markets poses challenges for policymakers in monitoring and regulating such activity. Having good-quality data will be key as these markets develop.

Fintech Credit: Market structure, business models and financial stability implications (PDF)