Abstract

In this study, I explore the impact of COVID-19 on the lending behavior of traditional and FinTech banks. I use difference-in-difference and triple-diff-in-diff approach with 2019-2020 HMDA loan application data and the Covid Community Vulnerability Index (CVI) to study 1) borrower profiles and loan application demand, 2) lender scrutiny stringency i.e. application approval rates, 3) loan interest rates, and 4) securitization of loans in counties with different level of epidemic vulnerability before and after the epidemic. I find that borrowers in regions with high vulnerability are able to embrace FinTech more quickly. At the same time, FinTech has expanded its previous target demographic to older, non-white, and ethnic minority borrowers. However, the supply side has not softened its application review criteria in response to the surge in demand. Lenders have been more cautious, and while minorities are more willing to apply for FinTech loans, it is worth noting that traditional banks have taken on a social responsibility at this time to increase their lending approval rates for such community. FinTech banks, on the other hand, have expanded the sale of loans, shifting the uncertainty risk to the broad investors.