Area: Finance

Committee Members: Dr. Sudheer Chava (Chair), Dr. Manasa Gopal, Dr. Wendi Du (University of South Carolina)

Title: Essays on FinTech, AI and Innovation in Finance

Dissertation Overview:

 Essay 1: How Do Banks Attract Deposits From Households?

Households allocate their savings between bank deposits and capital markets, yet deposit competition is typically studied only across banks. Using household portfolio data, we show that banks compete not only with other banks for deposits but also with households’ outside investment opportunities. The same bank pays higher deposit rates in markets where households hold more equity and experiences larger deposit outflows following monetary tightening. We instrument household equity holdings using local exposure to zero-commission trading. Our results show that greater household sensitivity to relative returns increases deposit rates, while a stronger response of outside returns to monetary policy generates larger deposit outflows after tightening. A 37-basis-point increase in the outside return reduces deposits by 1.75 percent and bank franchise value by 3.7 percent, weakening banks’ incentives to limit risk.

Essay 2: Paying for Prompting: How Generative AI Subscriptions Shape Household Finance and Labor Decisions

Using transaction-level consumer data, we study who subscribes to generative AI and how household financial and labor-market outcomes evolve around adoption. We identify paid subscriptions to major generative AI services directly from household transactions and document substantial heterogeneity in adoption across consumers. We find that AI subscription is followed by increases in salary, income, and spending. These gains are accompanied by greater employer mobility: subscribers become less likely to receive pay from their previous employers and more likely to receive pay from new employers, with the largest income gains concentrated among workers who switch employers. We further examine whether generative AI expands workers’ opportunity sets by facilitating transitions across more distant employers. Overall, our findings provide new evidence on how the diffusion of generative AI is associated with household financial outcomes and labor-market reallocation.

Essay 3: Fintech Securitization: Lending Incentives and Consumer Outcomes

We study how access to securitization funding affects fintech lending and consumer outcomes. We exploit the 2020 Term Asset-Backed Securities Loan Facility (TALF), which lowered securitization funding costs for eligible asset classes, and compare fintech lenders with differential exposure to the program. Following the shock, lending recovers more strongly among fintech lenders with prior access to eligible securitization markets. We then use consumer credit bureau data to examine the financial outcomes of borrowers receiving credit from exposed lenders. Among fintech lenders, borrowers subsequently experience greater delinquency and charge-offs, with similar patterns within credit cards. We further examine whether these outcomes reflect expanded credit access to predictably riskier borrowers or weaker screening incentives associated with transferring credit risk. Overall, our analysis sheds light on how securitization affects fintech credit supply, lending incentives, and borrower outcomes.