Reintermediation in FinTech: Evidence from Online Lending

60 Pages Posted: 18 Jun 2018 Last revised: 11 Aug 2019

See all articles by Tetyana Balyuk

Tetyana Balyuk

Emory University - Goizueta Business School

Sergei A. Davydenko

University of Toronto - Finance Area

Date Written: August 8, 2019

Abstract

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

Balyuk, Tetyana and Davydenko, Sergei A., Reintermediation in FinTech: Evidence from Online Lending (August 8, 2019). 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 A. Davydenko

University of Toronto - Finance Area ( email )

Toronto, Ontario M5S 3E6
Canada

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