The Value of "New" and "Old" Intermediation in Online Debt Crowdfunding

Abstract

We study the welfare effects of the transition of online debt crowdfunding from the older “peer-to-peer” model to the “marketplace” model, where the crowdfunding platform sells diversified loan portfolios to investors. We develop an equilibrium model of debt crowdfunding and estimate it on a novel database from a large Chinese platform. Moving from the peer-to-peer to the marketplace model raises lender surplus, platform profits, and credit provision. Moreover, reducing lender exposure to liquidity risk can be beneficial. A counterfactual where the platform resembles a bank by bearing liquidity risk generates larger lender surplus and credit provision when liquidity is low.

Keywords: Marketplace credit, Chinese financial system, Structural estimation

JEL Classification: D14, D61, G21, G51, L21