Unraveling Information Sharing in Consumer Credit Markets

Title: Unraveling Information Sharing in Consumer Credit Markets.

Speaker: Benedict Guttman-Kenney (University of Chicago – Booth School of Business).

Abstract: We study the breakdown of information sharing in US consumer credit markets. There is a 53 percentage point decrease in US credit cards sharing actual payments information with credit bureaus between 2013 and 2022. We show the sensitivity of information sharing to innovations enabling targeting of profitable customers. Credit card lenders are responding to credit bureaus’ innovation that uses actual payments information to reveal credit card behaviors that predict profitability components: spending drives interchange revenue, and revolving debt drives interest revenue. Spending is a non-default source of uncertainty lenders face and, by not sharing actual payments information, lenders limit their competitors’ ability to target high spenders. Finally, mandating information sharing increases competition.