Banks' use of artificial intelligence enables them to process quantitative information more efficiently and can reduce the information asymmetry between financial intermediaries and their clients. In contrast, the more traditional relationship-based approach relies more on qualitative information. This paper empirically studies the relevance of the interaction between these two approaches for Italian banks' credit supply and firms' investment and employment decisions before and during the pandemic crisis.
For the same length of the relationship between banks and firms, intermediaries using artificial intelligence (AI banks) provide more credit and at lower interest rates than other banks in normal times, but this was not the case during the Covid-19 crisis. The supply of credit by AI banks is also less affected by macroeconomic developments, as in the case of the pandemic, reducing their impact on firms' investment and employment decisions.
