Reintermediation in FinTech: Evidence from Online Lending

91 Pages Posted: 18 Jun 2018 Last revised: 24 Jan 2023

See all articles by Tetyana Balyuk

Tetyana Balyuk

Emory University - Goizueta Business School

Sergei Davydenko

University of Toronto - Finance Area

Date Written: January 20, 2023

Abstract

We document the unique structure of the peer-to-peer lending market. Originally designed as decentralized, the market has become highly, but not fully, reintermediated. The platforms' software now performs essentially all tasks related to loan evaluation, whereas most lenders are passive and automatically fund most applications on offer. Yet unlike banks, and in contrast to theories predicting full reintermediation, the platforms provide detailed loan information, and some active loan pickers coexist with passive investors. We argue that while intermediation attracts unsophisticated passive investors, transparency in the presence of active investors resolves the lending platform's moral hazard problem inherent in intermediated markets.

Keywords: FinTech; marketplace lending; disintermediation; intermediation; monitoring; trust in lending

JEL Classification: G23, D47, D82, D45, G51

Suggested Citation

Balyuk, Tetyana and Davydenko, Sergei, Reintermediation in FinTech: Evidence from Online Lending (January 20, 2023). Michael J. Brennan Irish Finance Working Paper Series Research Paper No. 18-17, 31st Australasian Finance and Banking Conference 2018, Available at SSRN: https://ssrn.com/abstract=3189236 or http://dx.doi.org/10.2139/ssrn.3189236

Tetyana Balyuk (Contact Author)

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States

Sergei Davydenko

University of Toronto - Finance Area ( email )

Toronto, Ontario M5S 3E6
Canada

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