Peer-to-Peer Crowdfunding: Information and the Potential for Disruption in Consumer Lending

30 Pages Posted: 18 Jan 2015

See all articles by Adair Morse

Adair Morse

University of California, Berkeley - Haas School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: January 17, 2015

Abstract

Can peer-to-peer lending (P2P) crowdfunding disintermediate and mitigate information frictions in lending such that choices and outcomes for at least some borrowers and investors are improved? I offer a framing of issues and survey the nascent literature on P2P. On the investor side, P2P disintermediates an asset class of consumer loans, and investors seem to capture some rents associated with the removal of the cost of that financial intermediation. Risk and portfolio choice questions linger prior to any inference. On the borrower side, evidence suggests that proximate knowledge (direct or inferred) unearths soft information, and by implication, P2P should be able to offer pricing and/or access benefits to potential borrowers. However, social connections require costly certification (skin in the game) to inform credit risk. Early research suggests an ever-increasing scope for use of Big Data and incentivized re-intermediation of underwriting. I ask many more questions than current research can answer, hoping to motivate future research.

Keywords: Crowdfunding, Peer-to-Peer Lending, Social Finance, Disintermediation, Marketplace Finance, Screening, Consumer Lending

JEL Classification: G20, G21

Suggested Citation

Morse, Adair, Peer-to-Peer Crowdfunding: Information and the Potential for Disruption in Consumer Lending (January 17, 2015). Available at SSRN: https://ssrn.com/abstract=2551272 or http://dx.doi.org/10.2139/ssrn.2551272

Adair Morse (Contact Author)

University of California, Berkeley - Haas School of Business ( email )

545 Student Services Building, #1900
2220 Piedmont Avenue
Berkeley, CA 94720
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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