FinTech Credit and Entrepreneurial Growth

Based on automated credit lines to about two million vendors trading on Alibaba’s online retail platform, and a discontinuity in the credit decision algorithm, we document that a vendor’s access to FinTech credit boosts its sales growth, transaction growth, and the level of customer satisfaction gauged by product, service, and consignment ratings. These effects are more pronounced for vendors with (1) sparse credit information; (2) less collateral; (3) higher distribution costs; and (4) weaker debt contract enforceability in local regions, all of which reveal a FinTech advantage over traditional credit technology.