Reintermediation in FinTech: Evidence from Online Lending
60 Pages Posted: 18 Jun 2018 Last revised: 11 Aug 2019
Date Written: August 8, 2019
The peer-to-peer loan market was designed to bring together borrowers and lenders without banks as middlemen. Yet over time P2P lending platforms have evolved into new intermediaries, performing essentially all tasks related to loan evaluation. By contrast, lenders are overwhelmingly passive and automatically fund almost all loans on offer. The dominant role of lending platforms without skin in the game makes the market vulnerable to moral hazard, checked by the threat of institutional investors' withdrawal. Our findings suggest that in markets without private information reintermediation may arise naturally as the platform's expertise in data analysis crowds out that of investors.
Keywords: FinTech; Peer-to-peer lending; Consumer finance; Disintermediation; Reintermediation
JEL Classification: G11: G12: D53; D81; D82
Suggested Citation: Suggested Citation