Fintechs are believed to help expand borrowing entry to underserved consumers in place of taking up a lot more chance Conceptual We compare brand new efficiency show out of LendingClub’s unsecured personal loans that have comparable money got its start of the banking institutions. Having fun with stochastic frontier estimation, we decompose the fresh noticed nonperforming mortgage (NPL) proportion to the about three parts: a knowledgeable-practice minimal NPL ratio, the other NPL proportion, and a mathematical music, the former a couple of and this echo the fresh lender’s built-in borrowing exposure and you will financing inefficiency, correspondingly. Since 2013 and you will 2016, we discover that highest NPL rates at the largest banks try motivated by the intrinsic borrowing risk, as opposed to credit inefficiency.