Interest rates as a finance battleground? The rise of Fintech and big tech credit providers and bank interest margin

Using data from 91 countries spanning 2013–2019, I show that the rise of alternative credit lines (fintech and big tech) can be robustly associated with decreasing profit margins in the banking sector. Results show that traditional banks may have responded defensively to the rising share of alternative credit lines, lowering lending rates and increasing deposit rates. The evidence is robust and remains significant even when countries with a larger share of alternative credit lines are taken out of the sample. The paper presents several promising avenues for future research.