Disruptive forces or harmonious partners? Evidence from a global panel study of alternative credit and bank lending

Alternative credit, driven by Financial Technology (FinTech) and BigTech lending, has reshaped global credit markets, acting as both a disruptor and a partner to traditional banks. Using a panel of 145 countries from 2013 to 2020 and addressing endogeneity through a two-stage least squares (2SLS) strategy, this study examines whether alternative credit complements or substitutes traditional bank credit and how these relationships evolve during systemic shocks such as the COVID-19 pandemic. The findings show that FinTech and BigTech credit generally complement traditional bank lending, reflecting market segmentation, efficiency-enhancing competition and partnership-driven intermediation. However, this complementarity weakens during systemic stress, with the pandemic contributing to a contraction in bank credit amid heightened risk aversion. The findings remain robust across alternative specifications addressing dynamic bias and cross-country heterogeneity, reinforcing that alternative credit strengthens the broader credit ecosystem, though its impact is sensitive to macro-financial conditions.