Big Techs vs Banks

We study an economy in which large technology companies, Big Techs (BTs), provide credit to firms operating on their platforms. We focus on two advantages that BTs have with respect to banks: better information on their clients and better enforcement of credit repayment since BTs can exclude a defaulting firm from their ecosystem. When BTs have only a limited information advantage they enter the credit market and they are both more efficient than banks in screening firms ex ante, and more effective in reducing strategic defaults. When BTs have both superior enforcement and complete and private information of the firm type BTs can enter banks’ turf only if they guarantee some privacy to firms by refraining from collecting some information and leaving some rents to them. BTs may share information by providing public information to banks or selling credit scoring to banks with different outcomes in terms of efficiency