Finance: Research, Policy and Anecdotes

Big techs, QR code payments and financial inclusion

How can technology allow the smallest of the small firms gain access to external finance? High risk (due to information asymmetries and lack of collateralizable assets) and high costs makes lending to the smallest firms prohibitively expensive for most banks. And unlike consumer lending (which might also entail small amounts), it might be harder to automatise the screening and monitoring process. Enters fintech!  In a new paper with Leonardo Gambacorta,Yiping Huang, Zhenhua Li and Han Qiu, we gauge the effect of introducing the QR code as payment technology and how this allowed small traders to gain access to external funding. Specifically, we look at the example of Ant Group, which started providing payment services through QR codes, thus allowing offline merchants to access digital payment services. Ant Group uses the information collected through these services to decide on credit provision to merchants.


Based on a dataset of around half a million Chinese firm, we find that: (i) the creation of a digital payment footprint allows firms to access credit provided by the same big tech company, Ant Financial; (ii) transaction data generated via QR codes generate spillover effects on access to bank credit; and (iii) there are positive effects of access to big tech credit on sales, including during the Covid-19 shock. Gaining access to a more efficient payment technology thus allows these traders to signal credit worthiness and ultimately gain access to credit. Which also implies that the focus that we typically have in the financial inclusion literature on different financial services (payment, savings, credit, insurance) might not be always relevant, as they might actually hang together; in this case, payment and credit services from the same company – in other cases (as in my Kenya-focused paper on mobile money) from different providers.