The development of financial technology has led to an increase in the closure of bank branches in many countries. In the UK, the total number of bank and building society branches fell by 34% between 2012 and 2021 (See Booth 2022, Browning 2022, Edmonds 2018 and Small Business Finance Markets Report 2023 by the British Business Bank BBB 2023).

Gopal & Schnabl (2022) investigate the credit supply to small businesses in the aftermath of the 2008 financial crisis in the US. The data cover 3,717 banks and 3,841 nonbanks, mostly finance companies and FinTech lenders, which tended to lend to smaller firms. They show that nonbank lenders almost perfectly offset the decline in bank lending during the financial crisis. Gopal & Schnabl (2022)'s results suggest that P2P and bank lending to SMEs might be complements, rather than substitutes. Tang (2019), on the other hand, found that P2P to US consumers between 2009 and 2012 tended to be complement to bank credit.

Bank credit to SMEs also declined in the UK in the aftermath of the 2008 financial crisis, but took seven years to recover to pre-2008 levels, and data from the Bank of England clearly show that peer-to-peer (P2P) lending started growing exactly in the same year bank lending reached the 2008 level . This suggests that P2P and bank lending to SMEs might be complements, rather than substitutes as found by Gopal & Schnabl (2022). To the extent of our knowledge there is no such empirical research in the UK.

References

Booth, L. (2022), Statistics on access to cash, bank branches and atms, Commons Library Research Briefing CBP08570, House of Commons Library. URL: https://researchbriefings.files.parliament.uk/documents/CBP-8570/CBP-8570.pdf

Browning, S. (2022), The future of local banking services and access to cash, Commons Library Research Briefing 9453, House of Commons Library. URL: https://researchbriefings.files.parliament.uk/documents/CBP-9453/CBP-9453.pdf

Edmonds, P. (2018), Bank branch closures, Commons Library Briefing Paper 385, House of Commons Library. URL: https://commonslibrary.parliament.uk/research-briefings/sn00385/

Gopal, M. & Schnabl, P. (2022), ‘The rise of finance companies and fintech lenders in small business lending’, The Review of Financial Studies 35(11), 4859–4901.

Tang, H. (2019), ‘Peer-to-peer lenders versus banks: Substitutes or complements?’, The Review of Financial Studies 32(5), pp. 1900–1938. URL: https://www.jstor.org/stable/48568943