Do Social Cause and Social Technology Meet? Impact of Web 2.0 Technologies on Peer-to-Peer Lending Transactions

Cahiers du CEREN, Vol. 29, pp. 177-192, 2009

35 Pages Posted: 9 Oct 2008 Last revised: 7 Aug 2014

See all articles by Arvind Ashta

Arvind Ashta

CEREN EA 7477 Burgundy School of Business - Université Bourgogne Franche-Comté

Djamchid Assadi

Université de Bourgogne - Department of Marketing

Date Written: October 9, 2008

Abstract

Microcredit interest costs remain higher than those of commercial banks in spite of significant donor funds, largely owing to transaction costs relative to small loan sizes. With the rise of Web 2.0 and online social interactivity, can these transaction costs be reduced through peer to peer lending? Peer to Peer lending and Web 2.0 have two things in common. The first common denominator is that both of them are rather newcomers in their respective fields and growing fast. The second is that they are both based on mutual and social exchanges between people instead of centrally controlled communications and relationships. The main objective of this paper was to investigate whether they are integrated to support a higher level of social interactions and associations for less (transaction) costs. We find that peer to peer lending consists of diverse websites of microcredit (Kiva, Wokai), social investing (MicroPlace) as well as small loans at market rates (Prosper, Zopa, Lending Club), and even lending between friends and family members (Virgin Money). The paper studies the use of web 2.0 technologies (blogs, interactivity between lenders and buyers, peers' reviews and comments, peers communities and chats) in six such peer-to-peer lending sites. It finds that most of the peer-to-peer lenders are in fact intermediaries between the peers (lender and borrowers) and there is little direct contact between the peers. One website used none of the web 2.0 tools. None of the websites used all the web 2.0 tools. The impact on transaction costs is therefore very little.

Keywords: Peer to peer, p2p, social lending, online lending, microcredit, microfinance, technology, web 2.0, trust, innovation

JEL Classification: G2, L1, L2, L31, L86, M1, M3

Suggested Citation

Ashta, Arvind and Assadi, Djamchid, Do Social Cause and Social Technology Meet? Impact of Web 2.0 Technologies on Peer-to-Peer Lending Transactions (October 9, 2008). Cahiers du CEREN, Vol. 29, pp. 177-192, 2009 . Available at SSRN: https://ssrn.com/abstract=1281373

Arvind Ashta (Contact Author)

CEREN EA 7477 Burgundy School of Business - Université Bourgogne Franche-Comté ( email )

29 rue Sambin
21000 Dijon
France

Djamchid Assadi

Université de Bourgogne - Department of Marketing ( email )

29, rue Sambin
BP 50608
21006 Dijon
United States

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