This paper uses credit bureau data on 648 million retail loans in India to examine the comparative advantages of shadow banks across market segments. Using weather shocks as a proxy for credit demand, we show that Fintechs respond more in uncollateralized markets. In contrast, non-Fintech shadow banks exhibit stronger responsiveness in collateralized markets. Exploiting geographic heterogeneity in the adoption of digital payments, we identify technology as the key advantage for Fintechs. Leveraging four natural experiments, we document the significance of lower regulation for non-Fintech shadow banks. Our results suggest that the comparative advantage of shadow banks differs across market segments.

Open banking enables small businesses to share their bank financial data with potential lenders. I examine the effect of open banking on collateralization in small business lending. For identification, I exploit institutional features of the UK’s open banking policy that creates a discontinuity in firms’ eligibility to share data. Using a novel loan-level dataset covering the entire UK secured business loan market, I document that open banking eases the pledge of assets like accounts receivable and inventory. Firms eligible to share data are more likely to pledge such assets as collateral, thereby improving their access to credit. These effects are more pronounced for firms facing greater information asymmetry and those with greater information available to share. These findings highlight the role of open banking in reducing collateral constraints by mitigating information asymmetry.

We analyze how the proximity of bank branches affects small business outcomes, focusing on independent retail pharmacies during the COVID-19 crisis and subsequent recovery. Leveraging detailed location and foot traffic data for more than 20,000 pharmacies across 2,528 counties in the United States, we show that proximity to non-community bank branches has a significantly positive effect on the recovery of independent pharmacies, resulting in 10% higher growth, while such effects do not exist for stores close to community banks. We identify a lending channel: the effect is primarily driven by banks that place a greater focus on lending to small businesses.

Additionally, we use brand-name pharmacies in the same location as a control group to account for unobservable factors in the local areas, as they likely cater to similar consumers yet do not rely on local bank financing. We show that proximity to banks significantly reduces the brand-independent gap. Our results are also consistent when comparing stores in similar micro-areas within the same county that differ in their proximity to bank branches. Our findings challenge the view that community banks support small businesses and have implications for the spatial role of bank access in shaping small business resilience.