The Pricing Strategies of Unsecured Consumer Loans

49 Pages Posted: 17 Apr 2020

See all articles by Lei Lu

Lei Lu

Asper School of Business, University of Manitoba

Jianxing Wei

University of International Business and Economics (UIBE) - School of Banking and Finance

Weixing Wu

University of International Business and Economics (UIBE)

Yi Zhou

San Francisco State University

Date Written: March 29, 2020

Abstract

This paper analyzes lenders' pricing strategies in the business-to-customer (B2C) unsecured loan market by using a proprietary dataset of approximately 3 million unsecured consumer loans from a B2C online retailer in China. We find that lenders' decisions to invite customers are based on customers' credit rating and age and that lenders increase credit limits and charge higher interest rates for solicited riskier borrowers than for unsolicited riskier borrowers. This phenomenon was exacerbated after the passage of the China Banking Regulatory Commission (CBRC) Act. We develop a model of revolving credit contract design. The model's predictions are consistent with our empirical findings.

Keywords: Consumer finance, Business-to-consumer (B2C), Pricing strategies

JEL Classification: D12, D14, D18, D31, D91, E21, G11, G21, G23, G28

Suggested Citation

Lu, Lei and Wei, Jianxing and Wu, Weixing and Zhou, Yi, The Pricing Strategies of Unsecured Consumer Loans (March 29, 2020). Available at SSRN: https://ssrn.com/abstract=3563584 or http://dx.doi.org/10.2139/ssrn.3563584

Lei Lu (Contact Author)

Asper School of Business, University of Manitoba ( email )

181 Freedman Crescent
Winnipeg, Manitoba R3T 5V4
Canada

Jianxing Wei

University of International Business and Economics (UIBE) - School of Banking and Finance ( email )

No.10, Huixindong Street
Chaoyang District
Beijing, 100029
China

Weixing Wu

University of International Business and Economics (UIBE) ( email )

10, Huixin Dongjie
Changyang District
Beijing, Beijing 100029
China

Yi Zhou

San Francisco State University ( email )

College of Business
1600 Holloway Avenue
San Francisco, CA 94132
United States
(415) 338-2661 (Phone)
(415) 338-0596 (Fax)

HOME PAGE: http://cob.sfsu.edu/directory/yi-zhou

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
43
Abstract Views
511
PlumX Metrics