The Expansion of the Peer-to-Peer Lending

39 Pages Posted: 21 Sep 2016 Last revised: 26 Aug 2019

See all articles by Olena Havrylchyk

Olena Havrylchyk

Université Paris I Panthéon-Sorbonne - Centre d'Economie de la Sorbonne (CES); Labex ReFi

Carlotta Mariotto

European Commission DG COMP - Chief Economist Team

Talal-Ur- Rahim

Boston University

Marianne Verdier

Université Paris 2 Panthéon Assas

Date Written: August 23, 2019

Abstract

We use data from the two leading P2P lending platforms on the US consumer credit market, Prosper and Lending Club, to explore the main drivers of the expansion of consumer demand for P2P credit. We exploit the heterogeneity in local credit markets at the county level to test three hypotheses: 1) global financial crisis; 2) competition and barriers to entry; and 3) learning costs. Disentangling between these hypotheses is difficult because the financial crisis has triggered an increase in market concentration and the closure of bank branches. Our findings suggest that P2P lending platforms have partly substituted for banks in counties that were more affected by banks’ deleveraging in the wake of the financial crisis. High market concentration and high branch density appear to deter the entry and expansion of the P2P lending. Finally, we find a positive impact of variables that are correlated with lower learning costs, such as education, population density, high share of young population, as well as important spatial interactions.

Keywords: peer-to-peer lending, online lenders, market structure, brand loyalty, financial crisis, internet, information and communication technologies

JEL Classification: G21, G23, G01, O33, D40

Suggested Citation

Havrylchyk, Olena and Mariotto, Carlotta and Rahim, Talal-Ur- and Verdier, Marianne, The Expansion of the Peer-to-Peer Lending (August 23, 2019). Available at SSRN: https://ssrn.com/abstract=2841316 or http://dx.doi.org/10.2139/ssrn.2841316

Olena Havrylchyk

Université Paris I Panthéon-Sorbonne - Centre d'Economie de la Sorbonne (CES) ( email )

106-112 Boulevard de l'hopital
106-112 Boulevard de l'Hôpital
Paris Cedex 13, 75647
France

Labex ReFi ( email )

79 avenue de la République
Paris, 75011
France

Carlotta Mariotto (Contact Author)

European Commission DG COMP - Chief Economist Team ( email )

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

Talal-Ur- Rahim

Boston University

595 Commonwealth Avenue
Boston, MA 02215
United States

Marianne Verdier

Université Paris 2 Panthéon Assas ( email )

France

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