Addressing information asymmetries in online peer-to-peer lending

Friendship Networks and Information Asymmetry in Online Peer-to-Peer Lending Mingfeng Lin , N.R. Prabhala**, and Siva Viswanathan* Abstract We study the online market for peer-to-peer (P2P) lending, in which individuals bid on unsecured microloans sought by other individual borrowers. Using a large sample of consummated and failed listings from

12 Oct 2018 Keywords: crowdfunding; peer-to-peer lending; P2P; credit grade; FICO score; default risk The fundamental problem of lending is information asymmetry between Potential lenders can then view the loan online and start to fund it. Finally, we address to what extent these insights are taken into account  Addressing Information Asymmetries in Online Peer-to-Peer Lending 2.1 Introduction. It is widely agreed that small businesses play a critical role in economic growth, 2.2 Online Peer-to-Peer Lending Platforms. 2.3 Information Asymmetries and Peer to Peer Lending Platforms. 2.4 Conclusions and Addressing Information Asymmetries in Online Peer-to-Peer Lending: FinTech and Strategy in the 21st Century. Digital technologies are transforming how small businesses access finance and from whom. This chapter explores online peer-to-peer (P2P) lending, a form of crowdfunding that connects borrowers and lenders. Online peer-to-peer (P2P) microloan lending practice is becoming prevalent worldwide. However, information asymmetry between lenders and borrowers in this market may create adverse selection and moral hazard problems that could eventually lead to a high risk of loan default. In the proposed study, we Peer-to-peer (P2P) lending platforms are online platforms where borrowers place requests for loans online and private lenders bid to fund these. Information asymmetry is a key issue in online peer-to-peer lending marketplaces that can result in moral hazard or adverse selection, and ultimately impact the viability and success of individual

Peer-to-peer lending, also abbreviated as P2P lending, is the practice of lending money to individuals or businesses through online services that match lenders 

Online Peer-to-Peer lending platforms claim to be beneficial for both borrowers and lenders by eliminating expensive intermediaries and reducing transaction costs. However, are the often inexperienced lenders who operate in a pseudonymous online environment with potentially significant information asymmetries really able to obtain an attractive return on their investment? This paper discusses of online peer-to-peer lending platforms. This paper is going to address the issue of loan profitability. Additionally, it discusses if the borrower information presented on the platform sufficiently reduces information asymmetries to prohibit opportunistic behaviour on the borrowers’ side. 2 Return on Investments in Online In the past decade, online Peer-to-Peer (P2P) lending platforms have transformed the lending industry, which has been historically dominated by commercial banks. Information technology breakthroughs such as big data-based financial technologies (Fintech) have been identified as important disruptive driving forces for this paradigm shift. Information asymmetry is a key issue in online peer-to-peer lending marketplaces that can result in moral hazard or adverse selection, and ultimately impact the viability and success of individual Using peer-to-peer (P2P) lending as an example, we show that learning by doing plays an important role in alleviating the information asymmetry between market players. Although the P2P platform (Prosper.com) discloses part of borrowers' credit histories, lenders face serious information problems because the market is new and subject to adverse

12 Oct 2018 Keywords: crowdfunding; peer-to-peer lending; P2P; credit grade; FICO score; default risk The fundamental problem of lending is information asymmetry between Potential lenders can then view the loan online and start to fund it. Finally, we address to what extent these insights are taken into account 

29 Dec 2015 In the past decade, online Peer-to-Peer (P2P) lending platforms have costs affect information asymmetry in P2P lending: the economics of big data has used the same email address, the number of connections on Twitter,  Peer-to-peer lending, also abbreviated as P2P lending, is the practice of lending money to individuals or businesses through online services that match lenders  Peertopeer (P2P) lending – a subcategory of crowd funding – is a relatively new internetbased various other forms of crowd funding, online real estate lending and invoice trading. How do platforms try to mitigate information asymmetries between This article addresses these issues and summarizes the empirical. But there is an information asymmetry between lenders and borrowers to which online P2P lending platforms have to face. As many loans are not secured by  Using peer-to-peer (P2P) lending as an example, we show that learning by doing plays an online, especially when information asymmetry is severe but reputation address both private learning and market-wide learning, thanks to the  Pages 1-14. Di Pietro, Francesca. Preview. Addressing Information Asymmetries in Online Peer-to-Peer Lending. Pages 15-31. Cummins, Mark (et al.) Preview. Peer-to-peer (P2P) marketplaces, such as Uber, AirBnB, and Lending club, platform is now the world's largest online marketplace connecting individual Even as P2P platforms expand in various industries, information asymmetry remains a By solving the ordinary differential equation given by Expression [3], we find 

7 Dec 2018 This chapter explores online peer-to-peer (P2P) lending, a form of crowdfunding that connects borrowers and lenders. Information asymmetry is 

Using peer-to-peer (P2P) lending as an example, we show that learning by doing plays an online, especially when information asymmetry is severe but reputation address both private learning and market-wide learning, thanks to the  Pages 1-14. Di Pietro, Francesca. Preview. Addressing Information Asymmetries in Online Peer-to-Peer Lending. Pages 15-31. Cummins, Mark (et al.) Preview. Peer-to-peer (P2P) marketplaces, such as Uber, AirBnB, and Lending club, platform is now the world's largest online marketplace connecting individual Even as P2P platforms expand in various industries, information asymmetry remains a By solving the ordinary differential equation given by Expression [3], we find  20 Nov 2016 But do P2P lenders reduce information asymmetries? The key variable I focus on to address the behavioral hypothesis Company They Keep: Friendship Networks and Information Asymmetry in Online Peer-to-Peer. 16 Mar 2015 Perhaps the most critical function of financial institutions is to address the information asymmetries in lending. Lenders have a difficult time  17 May 2016 We therefore expect banks to adapt to the emergence of P2P lending, that the full development of the sector requires much further work addressing online auction approach in which borrowers indicate the maximum employment of specialised technologies to overcome information asymmetries is the 

Addressing Information Asymmetries in Online Peer-to-Peer Lending 2.1 Introduction. It is widely agreed that small businesses play a critical role in economic growth, 2.2 Online Peer-to-Peer Lending Platforms. 2.3 Information Asymmetries and Peer to Peer Lending Platforms. 2.4 Conclusions and

7 Dec 2018 This chapter explores online peer-to-peer (P2P) lending, a form of crowdfunding that connects borrowers and lenders. Information asymmetry is a  3 Oct 2019 Specifically, information asymmetry issues in both traditional financial institutions Online P2P lending nibbles at banks' loan business between, money and finance, and addresses alternative ways of financing spending. information, online P2P lending is still characterized by a high degree of information One way of alleviating asymmetric information problems is by trying to ask borrowers to disclose as much There is no research specifically addressing. In the past decade, online Peer-to-Peer (P2P) lending platforms have lending, we discuss how information asymmetry is reduced in the big data era. length of time the borrower has used the same email address, the number of connec-.

The online peer-to-peer (P2P) lending market, in which it is the practice of making unsecured microloans to other individual borrowers, is becoming more and more popular worldwide. In this market, information asymmetry between lenders and borrowers may create the adverse selection problem -- the lenders may fund sub-prime borrowers with high risk of defaulting. Online Peer-to-Peer lending platforms claim to be beneficial for both borrowers and lenders by eliminating expensive intermediaries and reducing transaction costs. However, are the often inexperienced lenders who operate in a pseudonymous online environment with potentially significant information asymmetries really able to obtain an attractive return on their investment? This paper discusses of online peer-to-peer lending platforms. This paper is going to address the issue of loan profitability. Additionally, it discusses if the borrower information presented on the platform sufficiently reduces information asymmetries to prohibit opportunistic behaviour on the borrowers’ side. 2 Return on Investments in Online In the past decade, online Peer-to-Peer (P2P) lending platforms have transformed the lending industry, which has been historically dominated by commercial banks. Information technology breakthroughs such as big data-based financial technologies (Fintech) have been identified as important disruptive driving forces for this paradigm shift. Information asymmetry is a key issue in online peer-to-peer lending marketplaces that can result in moral hazard or adverse selection, and ultimately impact the viability and success of individual Using peer-to-peer (P2P) lending as an example, we show that learning by doing plays an important role in alleviating the information asymmetry between market players. Although the P2P platform (Prosper.com) discloses part of borrowers' credit histories, lenders face serious information problems because the market is new and subject to adverse PERFORMANCE AS A SIGNAL TO INFORMATION ASYMMETRY PROBLEM IN ONLINE PEER-TO-PEER LENDING Lei Yang, The Chinese University of Hong Kong, yanglei@baf.cuhk.edu.hk Lai, Vincent Siu-king, The Chinese University of Hong Kong, vslai@cuhk.edu.hk Abstract