Leveraging Technology for SME Operational Efficiency in Online Peer-to-Peer Lending: Evidence from A Large-Scale Randomized Field Experiment

Abstract

Online P2P lending, a FinTech innovation, provides enhanced convenience surpassing traditional finance. In

particular, small and medium-sized enterprises (SMEs) have increasingly utilized these platforms to secure

urgent operational funding by appealing directly to potential investors. Yet, attracting investors, especially

during economic downturns, remains challenging. Our findings offer valuable insights into the strategies

that can enhance investor engagement and the platform’s operational efficiency, thereby contributing to

the development of more robust and resilient financial systems. Our study aims to bridge this gap by

investigating effective nudging messages for enhancing the operational efficiency of P2P platforms. Drawing

upon an investor’s utility with hyperbolic time-discounting framework, we experiment with five types

of nudges aimed at priming perceived benefits and costs of the investor: (i) improving social values by

cooperative or competitive message, (ii) mitigating hyperbolic time-discounting through precommitment

message, and (3) mitigating perceived investment search costs by sending an ease-and-convenience message,

with controlling a plain message to eliminate attention effect of nudging message from our experiment.

Collaborating with a major P2P platform in Asia, we conduct a randomized field experiment targeting P2P

lending investors. Intriguingly, in the online P2P lending context, ease-and-convenience-framed messages

notably boost investments and hasten decision-making, diverging from other nudges. Our prediction

resonates well with long-tenured platform users and risk-averse investors with psychological barriers

and lower self-efficacy, as well as non-tech-savvy investors. These findings carry significant implications,

pinpointing optimal strategies for propelling investments and prudent choices in the emerging online P2P

investing landscape.

Keywords: Digital nudging, ease-and-convenience nudge, field experiment, investor behavior, peer-to-peer lending