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The Expansion of Peer-to-Peer Lending

Author

Listed:
  • Havrylchyk Olena

    (University Paris 1 Pantheon Sorbonne, CES, UMR CNRS 8174, Paris, France)

  • Mariotto Carlotta

    (Oxera Consulting, Milan, Italy)

  • Rahim Talal

    (Research Fellow at ESCP Business School, Madrid, Spain)

  • Verdier Marianne

    (CRED, University Paris 2 Panthéon Assas, and CERNA, Ecole des Mines de Paris, Paris, France)

Abstract

We use data from the two leading US platforms, Prosper and Lending Club, to explore the drivers of the growing consumer demand for peer-to-peer (P2P) credit. Despite the online nature of new entrants, we rely on the spatial autoregressive model because spatial effects play an important role. Our findings suggest that the initial growth of P2P lending was spurred by the global financial crisis, but its growth after 2011 occurred in counties that were underserved by bank branches. The growth of P2P lending is slower in counties with high bank concentration and this factor is the most robust, stable over time and economically important in our study. Counties with lower population density, lower share of educated and young people experience lower growth of P2P lending, consistent with the hypothesis that learning costs deter the entry of new entrants.

Suggested Citation

  • Havrylchyk Olena & Mariotto Carlotta & Rahim Talal & Verdier Marianne, 2020. "The Expansion of Peer-to-Peer Lending," Review of Network Economics, De Gruyter, vol. 19(3), pages 145-187, September.
    • Handle: RePEc:bpj:rneart:v:19:y:2020:i:3:p:145-187:n:3
    DOI: 10.1515/rne-2020-0033
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    Citations

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    Cited by:

    1. Kowalewski, Oskar & Pisany, Paweł, 2023. "The rise of fintech: A cross-country perspective," Technovation, Elsevier, vol. 122(C).
    2. Gregory E. Elliehausen & Simona Hannon, 2023. "FinTech and Banks: Strategic Partnerships That Circumvent State Usury Laws," Finance and Economics Discussion Series 2023-056, Board of Governors of the Federal Reserve System (U.S.).
    3. Elliehausen, Gregory & Hannon, Simona M., 2024. "FinTech and banks: Strategic partnerships that circumvent state usury laws," Finance Research Letters, Elsevier, vol. 64(C).
    4. Hannon, Simona, 2024. "Essays on consumer finance," Other publications TiSEM 4958b451-b30a-4957-9763-1, Tilburg University, School of Economics and Management.

    More about this item

    Keywords

    peer-to-peer lending; market structure; barriers to entry; financial crisis; information and communication technologies; credit market;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G01 - Financial Economics - - General - - - Financial Crises
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

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