Digital Footprints as Collateral for Debt Collection

Time：24 Sept, Thur, 16:40-18:10

Invited Speaker：张博辉，Zhang,Bo Hui

Introduction：

Bohui Zhang is the executive associate dean of School of Management and Economics, presidential chair professor of finance at The Chinese University of Hong Kong, Shenzhen, the associate director of Shenzhen Finance Institute, the director of the Center for FinTech and Social Finance (SFI).

Abstract:

We examine the role of borrowers' digital footprints in debt collection. Using a large sample of personal loans from a fintech lender in China, we find that the information acquired by the lender through borrower's digital footprints can increase the repayment likelihood on delinquent loans by 18.5%. The effect can be explained by two channels: bonding borrower's obligations with their social networks and locating borrowers' physical addresses. Moreover, the lender is more likely to approve loan applications from borrowers with digital footprints, even though these borrowers have a higher likelihood of delinquency. The use of digital footprints remains legitimate in many instances under stringent privacy protection regulations and fair debt collection practices. Our findings suggest that digital footprints, as a new type of collateral, can ultimately enhance financial inclusion by facilitating the lender's collection of delinquent loans.