Financial technology-based (FinTech) lending is expected to ease U.S. mortgage market
frictions that have weakened the transmission of monetary policy to households. This
paper establishes that social networks play a key role in the spread of FinTech lending,
further amplifying the effect of monetary stimulus. I provide causal estimates of the
network effect of FinTech adoption: A one percentage-point increase in the FinTech
market share in a county’s socially connected markets raises the county’s FinTech
market share by 0.23-0.26 pps. To quantify the role of FinTech lending and its network
spillover in the transmission of monetary policy shocks, I build a heterogeneous-agent
model with social learning. The model shows that refinancing and consumption
responses to a monetary stimulus are 13% higher in the presence of FinTech lending and
network spillovers, and that almost half of this improvement is accounted for by network
spillovers. Counterfactual analysis suggests that a rise of the FinTech market share
to 70% would increase consumption and refinancing responses by 50%-60% relative to
the same economy without FinTech lending.