N° 19-39: Mortgage Lending through a FinTech Web Platform. The Roles of Competition, Diversification, and Automation

We analyze how banks offer and price mortgages through an online platform where they reach also regions in which they lack branches. We use unique data on responses from different banks to each applying household and exploit exogenous variation in prior competition. We find banks to offer more often and at lower margins to more concentrated markets, arguably motivated by more profitable refinancing and cross-selling opportunities. Banks also improve their inter-regional portfolio diversification with more attractive offers to regions more complementary to home markets. Choices become increasingly automated, reducing operating costs.