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Why do peer-to-peer (P2P) lending platforms fail? The gap between P2P lenders' preferences and the platforms’ intentions

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  • Galit Klein

    (Ariel University)

  • Zeev Shtudiner

    (Ariel University)

  • Moti Zwilling

    (Ariel University)

Abstract

In the current study, we examine why peer-to-peer (P2P) lending platforms play only a minor role in the finance industry in Israel, compared to the traditional banking system. We conducted two studies and attempted to discover if a discrepancy exists between the lenders' preferences and the platforms’ incentives. In the first study, we conducted a conjoint analysis to examine the impact of lenders' decisions to invest through P2P platforms. The second study examines the factors in which platforms use to determine the lending interest rate for loans. We found that although lenders wish to decrease their risk and guarantee their investment, P2P companies encourage riskier borrowers. This contradiction between the priorities of the lenders and those of the platforms may explain why the non-users consider P2P lending to be a high risk. We offer several suggestions to increase the attractiveness of the Fintech and lending platforms industry.

Suggested Citation

  • Galit Klein & Zeev Shtudiner & Moti Zwilling, 2023. "Why do peer-to-peer (P2P) lending platforms fail? The gap between P2P lenders' preferences and the platforms’ intentions," Electronic Commerce Research, Springer, vol. 23(2), pages 709-738, June.
    • Handle: RePEc:spr:elcore:v:23:y:2023:i:2:d:10.1007_s10660-021-09489-6
    DOI: 10.1007/s10660-021-09489-6
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    References listed on IDEAS

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    Cited by:

    1. Evangelos Katsamakas & J. Manuel Sanchez-Cartas, 2024. "A computational model of the effects of borrower default on the stability of P2P lending platforms," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 14(3), pages 597-618, September.

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