 Prof Zhiguo HE Fuji Bank and Heller Professor of Finance at the University of Chicago Booth School of Business. Director of Becker Friedman Institute-China and Co-Director of the Fama-Miller Center. Presentation: Open Banking | IIDS Zoom Seminar: BlockChain Technology and Smart Contracts Date: Wed, 7 OCT 2020 Time: 10:30am to 11:45am Free Online Registration  |
- Baseline model
- Credit market competition for borrowers with private types
- Lenders (bank and ntech) with asymmetric screening technologies
- Open banking and data sharing
- Borrowers can voluntarily share their own data resided in bank
- But what kind of data? Welfare implications?
- Endogenous credit quality inference: adverse selection as the backbone of credit market
- Open banking: Credit information sharing
- Potentially perverse e ect of open banking
- Open banking: privacy and targeted loans
- Endogenous sign-up population and information externalities
Open banking facilitates data sharing consented by customers who generate the data, with a regulatory goal of promoting competition between traditional banks and challenger fintech entrants. Open banking could make the entire financial industry better off yet leave all borrowers worse off, even if borrowers could choose whether to share their data. The importance of equilibrium credit quality inference from borrowers’ endogenous sign-up decisions. When data sharing triggers privacy concerns by facilitating exploitative targeted loans, the equilibrium sign-up population can grow with the degree of privacy concerns.
I would like to express my heartfelt thanks to Prof HE to bring us the academic model. The model points out that open banking could make the entire financial industry better off yet leave all borrowers worse off, even if borrowers could choose whether to share their data. Since the degree of privacy concern is an important welfare issue. Perhaps, one possible way to relax this concern is to use BlockChain Technology and Smart Contracts. The blockchain network serves as a secure ledger of transactions and information sharing thus are remodelling the traditional banking environment