How do banking fintech services affect SME debt?

Fintech technologies have become increasingly important in the banking industry, as they allow alternative effective means to interact with clients and collect hard information, i.e. codifiable data, to make better lending decisions. However, the advent of technology contrasts with the traditional bank-firm relationship based on human interactions and soft information. This study examines whether fintech favors or hampers the amount of debt finance issued by SMEs. Our findings reveal that the use of internet banking reduces SME debt, suggesting that credit decisions based on hard information reduce the likelihood of SMEs using bank debt. A key implication of our findings is that banks and entrepreneurs should reinforce their personal relationships.