Competition for Lending in the Internet Era: The Case of Peer-to-Peer Lending Marketplaces in the USA

24 Pages Posted: 28 Jun 2016

See all articles by Carlotta Mariotto

Carlotta Mariotto

European Commission DG COMP - Chief Economist Team

Date Written: June 27, 2016

Abstract

Peer-to-peer lending marketplaces are a phenomenon in great expansion in the USA and Europe. These Online platforms build an example of two-sided market as they try to attract and match lenders and borrowers, while facing the trade-off between increasing the volume of intermediated transactions and minimizing the risks. In this article, we provide a descriptive analysis on the competitive strategies used by these platforms, in a two-sided market environment, and we try to find whether these two platforms differentiate from each other or from banks. To provide evidence on this comparison, we exploit data obtained by Prosper and LendingClub websites, the two leading peer-to-peer lending platforms in the USA, for the years 2006-2013 in the case of Prosper, while for LendingClub they are for the years 2007 until 2014. We deduce that these platforms are substitutes with one another and that they are frontally competing.

Keywords: peer-to-peer lending; two-sided markets; crowdfunding; bank competition; non-banks; platform competition; Internet banking

JEL Classification: E42; G21; L96

Suggested Citation

Mariotto, Carlotta, Competition for Lending in the Internet Era: The Case of Peer-to-Peer Lending Marketplaces in the USA (June 27, 2016). Available at SSRN: https://ssrn.com/abstract=2800998 or http://dx.doi.org/10.2139/ssrn.2800998

Carlotta Mariotto (Contact Author)

European Commission DG COMP - Chief Economist Team ( email )

1210 Sint-Joost-ten-Noode
Bruxelles, 1000
Belgium
0032493961759 (Phone)

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