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P2.T10.20.3. Fintech credit markets

Nicole Seaman

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Learning objectives: Describe the difficulties involved in measuring the size of the global Fintech credit market. Describe the factors that have driven the recent growth of the Fintech credit market. Examine the potential benefits and risks inherent in the Fintech credit market. Compare and evaluate how different jurisdictions have crafted policy and regulatory responses to the Fintech credit market.

Questions:
(Source: Fintech credit markets around the world: size, drivers and policy issues, BIS Quarterly Review, September 23, 2018)

20.3.1. Although as of yet there is no single agreed-upon definition of fintech credit, which of the following abbreviated definitions MOST NEARLY captures the essential feature of Fintech Credit as articulated by Claessens, Frost, Turner, and Zhu in their BIS Quarterly article ("Fintech credit markets around the world: size, drivers and policy issues")?

a. Acceptance of demand deposits
b. Maintenance of a branch distribution network
c. Customer interaction that is entirely (or mostly) online
d. High dependence on the balance sheet and net interest margin


20.3.2. According to Claessens et al (“Fintech credit markets around the world"), there are several drivers of the rapid growth in the Fintech credit market. However, which single variable explains MOST of the fintech credit market's growth?

a. GDP per capita
b. Competition (Lerner index)
c. More competitive banking sector
d. Country-specific factors (dummy coefficients)


20.3.3. According to Claessens et al (“Fintech credit markets around the world"), the growth of the Fintech credit market offers several natural, potential benefits. Each of the following is a natural benefit of Fintech credit innovations EXCEPT which is the LEAST LIKELY to be a natural benefit of fintech credit innovations?

a. Lower transaction costs
b. Lower default probabilities and better investor protection
c. Improved borrower convenience; e.g., faster mortgage loan processing
d. Greater diversity in alternative sources of credit and greater financial inclusion

Answers here:
 
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