P2P Lenders versus Banks: Cream Skimming or Bottom Fishing?

67 Pages Posted: 8 May 2018 Last revised: 28 Nov 2018

See all articles by Calebe de Roure

Calebe de Roure

Reserve Bank of Australia

Loriana Pelizzon

Goethe University Frankfurt - Faculty of Economics and Business Administration; Goethe University Frankfurt - Research Center SAFE; Ca Foscari University of Venice

Anjan V. Thakor

Washington University, Saint Louis - John M. Olin School of Business; European Corporate Governance Institute (ECGI)

Date Written: April 18, 2018

Abstract

We develop a simple theoretical model to motivate testable hypotheses about how peer-to-peer (P2P) platforms compete with banks for loans. The model predicts that (i) P2P lending grows when some banks are faced with exogenously higher regulatory costs; (ii) P2P loans are riskier than bank loans; and (iii) the risk-adjusted interest rates on P2P loans are lower than those on bank loans. We confront these predictions with data on P2P lending and the consumer bank credit market in Germany and find empirical support. Overall, our analysis indicates the P2P lenders are bottom fishing when regulatory shocks create a competitive disadvantage for some banks.

Keywords: P2P lending, bank lending, competition

JEL Classification: G21

Suggested Citation

de Roure, Calebe and Pelizzon, Loriana and Thakor, Anjan V., P2P Lenders versus Banks: Cream Skimming or Bottom Fishing? (April 18, 2018). SAFE Working Paper No. 206; Michael J. Brennan Irish Finance Working Paper Series Research Paper No. 18-13. Available at SSRN: https://ssrn.com/abstract=3174632 or http://dx.doi.org/10.2139/ssrn.3174632

Calebe De Roure

Reserve Bank of Australia

65, Martin Place
Sydney, NSW 2000
Australia

Loriana Pelizzon (Contact Author)

Goethe University Frankfurt - Faculty of Economics and Business Administration ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, D-60323
Germany

Goethe University Frankfurt - Research Center SAFE ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

HOME PAGE: http://www.safe-frankfurt.de

Ca Foscari University of Venice ( email )

Dorsoduro 3246
Venice, Veneto 30123
Italy

Anjan V. Thakor

Washington University, Saint Louis - John M. Olin School of Business ( email )

One Brookings Drive
Campus Box 1133
St. Louis, MO 63130-4899
United States

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

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