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

Abstract

Whereas many online marketplaces are fundamentally peer-to-peer, credit ones sell diversified loan portfolios characterized by maturity mismatch, a traditional feature of financial intermediation. To understand why, we develop a structural model of online debt crowdfunding and estimate it on a novel database from a large Chinese platform. Abandoning the peer-to-peer paradigm raises lender surplus, platform profits, and credit provision, but exposes investors to liquidity risk. A counterfactual where the platform resembles a bank by bearing liquidity risk generates larger lender surplus and credit provision when liquidity is low. More generally, our results shed light on how financial intermediation creates value.

Keywords: Chinese financial system, Marketplace credit, structural estimation

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