Financial literacy in for-profit vs pro-social peer-to-peer lending

Gonzalez, Laura

doi:10.1108/mf-07-2021-0329

Cited by 7 publications

(17 citation statements)

References 37 publications

(91 reference statements)

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“…As new generations of investors become more knowledgeable and comfortable with fintech than previous ones (Rosen, 2015; Granit, 2021), it is important to examine heuristics. Pro-social lenders are overconfident with respect to for-profit lenders (Gonzalez, 2022), and heuristics knowledge can guide financial literacy and “just-in-time” education on the platforms. This would support borrower inclusion without sacrificing returns, and with it the long-term success of pro-social P2P lending.…”

Section: Methodsmentioning

confidence: 99%

“…It is necessary to support the inclusion of less “bankable” borrowers without sacrificing investment returns. Furthermore, Gonzalez (2022) finds pro-social P2P investors overconfident with respect to for-profit investors and prone to suboptimal lending decisions. Fortunately, Du et al.…”

Section: Literaturementioning

confidence: 99%

“…This effect is more pronounced for male investors lending to highly trusted female loan applicants. In addition, and given the use of testimonials in P2P lending, Gonzalez (2022) examines a sample of 1,347 lending decisions by 449 finance students who are randomly conditioned towards for-profit or pro-social lending. Overall, conditioning through testimonials is effective, and affects reported risk, trust perceptions, and lending decisions.…”

Section: Literaturementioning

confidence: 99%

“…Moreover, female lenders report having less experience in investments and entrepreneurship, and a higher preference towards sustainability over profits. Interestingly, and despite the use of effective testimonials towards pro-social lending (Gonzalez, 2022), there is in general relatively low identification with similar-age borrowers. Thus, the statistical differences in Table 2 Panel B suggest that, in pro-social P2P lending, female lenders find themselves less prepared to make lending decisions despite comparable financial literacy and a higher interest in sustainability over profits.…”

Section: Empirical Evidencementioning

confidence: 99%

“…Furthermore, recent research finds that testimonials on P2P platforms influence risk perceptions and lending decisions. In addition, pro-social mindsets can lead to different and worrisome lending heuristics when compared to for-profit mindsets (Gonzalez, 2022). Therefore, it is arguably imperative to examine gender effects in relation to collateral options as well as self-identification of lenders with respect to borrowers in pro-social P2P lending.…”

Section: Introductionmentioning

confidence: 99%

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Doing well while doing good? Gender effects in pro-social peer-to-peer lending

Gonzalez

2022

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PurposeThe 2008 and 2020 crises reinvigorated discussions on the need to deepen financial inclusion through fintech. Peer-to-peer (P2P) lending facilitates pro-social direct lending to less “bankable” strangers while providing returns to at-times less experienced lenders. Information asymmetries and credit risk are substantial, and previous research finds suboptimal heuristics in for-profit lenders (Gonzalez, 2022). This study examines further the role of gender to facilitate “doing well while doing good”.Design/methodology/approachThis study examines 663 pro-social lending decisions by finance students on a mock P2P site. Testimonials were used to condition participants towards pro-social decision-making. Each participant was asked to make three lending decisions. The three loan applications were identical except for a female or male headshot (vs a control icon), and a randomly assigned difference in the trustworthiness or popularity of the male vs female loan applications among other lenders. Loan popularity is reported as a lower number of days needed to fund half the identical loan amount requested in the three loan applications (3 vs 11 days for headshot applications, and 7 days for control one).FindingsSelf-recognition in similar-age borrowers is more pronounced for lenders who have experienced financial trauma. Second, male lenders report higher confidence in their financial literacy and cash collateral. Third, cash collateral increases lending only to female borrowers. Fourth, higher perception of one's financial literacy increases confidence only when lending to females.Originality/valueThis is the first study to examine the role of gender, financial literacy, identification with borrowers, and collateral perception in pro-social P2P lending.

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Section: Methodsmentioning

confidence: 99%

Section: Literaturementioning

confidence: 99%

Section: Literaturementioning

confidence: 99%

Section: Empirical Evidencementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Doing well while doing good? Gender effects in pro-social peer-to-peer lending

Gonzalez

2022

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The Link between Family Financial Socialization in Adulthood and Investment Literacy of P2P Investors

Legenzova,

Leckė

2024

J Fam Econ Iss

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This paper examines how family financial socialization in adulthood is linked to the development of investment literacy among individual family members within the context of innovative financial services, specifically peer-to-peer (P2P) lending. Our findings revealed that P2P lending investors engage in a moderate level family financial socialization suggesting that family, as a key financial socialization agent in childhood and adolescence, maintains its role in adulthood. Additionally, such investors possess a high-level investment knowledge, skills, and attitudes. Explicit family financial socialization has a significant and positive effect on the individuals’ investment knowledge, skills, and attitudes, while the effect of implicit financial socialization is significant but negative for knowledge and attitudes. Such findings suggest that family discussion among adult members result in higher, while observations of family members’ investment behavior led to lower investment literacy. Our study found no significant moderating effect of the strength of social ties indicating that dynamics of family relations neither strengthen nor weaken proximal socialization outcomes. The analysis of differences across demographic groups unveiled statistically significant distinctions concerning respondents’ gender, income, and education. These results provide important insights for stakeholders, underscoring the significant role family socialization in adulthood plays in shaping individuals’ investment literacy, particularly of those investing on P2P lending platforms.

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