Can Banks Lend Like Fintechs? Technology, PPP, and the COVID-19 Pandemic

Using granular data, we describe the dimensions along which bank technologies differ from fintech competitors and construct a novel measure of a bank’s technology based upon its technology overlap with fintech firms. We show that a one standard deviation increase in our financial technology measure is associated with an 8.7 percentage point increase in transaction-based loans associated with the Paycheck Protection Program (PPP) in 2020Q2. Technology enables banks to originate outside of their branch market area and in less concentrated geographies, but does not crowd out in-market lending that is more associated with a physical presence. In a difference-in-differences analysis, we show an outsized increase in small business lending growth in 2020 for mid-sized high tech banks relative to their peers.