P2P Lenders versus Banks: Cream Skimming or Bottom Fishing?

Abstract

We derive three testable predictions from a bank-P2P lender model of competition: (a) P2P lending grows when some banks are faced with exogenously higher regulatory costs; (b) P2P loans are riskier than bank loans; and (c) the risk-adjusted interest rates on P2P loans are lower than those on bank loans. We test these predictions against data on P2P loans and the consumer bank credit market in Germany and find empirical support. Overall, our analysis indicates that P2P lenders are bottom fishing, especially when regulatory shocks create a competitive disadvantage for some banks.

Regulatory constraint and small business lending: do innovative peer-to-peer lenders have an advantage?

“…In addition, our paper adds alternative P2P lenders to the debate in the literature on small business lending (e.g. Buchak et al 2018;Tang 2019;Fuster et al 2019;Hughes et al 2022;De Roure et al 2022). We note that Bordo and Duca (2018) and Zou (2019) also focus on small business lending and the global financial crisis.…”

“…As mentioned, the FinTech phenomena began at the same time. There is now a growing literature on alternative P2P lenders (e.g., Cornaggia et al 2018;Buchak et al 2018;Tang 2019;Fuster et al 2019;Allen et al 2019;Hughes et al 2022;De Roure et al 2022). They all suggest P2P FinTechs' are becoming an alternative source of lending to traditional banks.…”

The Real Effects of FinTech Lending on SMEs: Evidence from Loan Applications

“…The literature has been studying the role of FinTech in providing financial services to individuals in the context of mortgage loan originations (Buchak, Matvos, Piskorski, andSeru (2018), Fuster, Plosser, Schnabl, andVickery (2019)) and consumer credit (see, among others, Danisewicz andElard (2018), de Roure, Pelizzon, andThakor (2019), Balyuk (2019)). In the context of residential mortgage loans, Buchak, Matvos, Piskorski, and Seru (2018) find that Fin-Tech lenders are less likely to serve less creditworthy FHA borrowers and higher unemployment regions.…”

Fintech Lending Under Austerity

“…Credit markets worldwide are experiencing the rapid proliferation of FinTech. A growing literature on this topic examines technological factors behind the rise of peer-to-peer (P2P) lending (Buchak, Matvos, Piskorski, and Seru, 2018;Fuster, Plosser, Schnabl, and Vickery, 2019), its impact on credit market frictions (Fuster, Plosser, Schnabl, and Vickery, 2019;Tang, 2019;Dobbie, Liberman, Paravisini, and Pathania, 2021;Fuster, Goldsmith-Pinkham, Ramadorai, and Walther, 2021), and the implications of competition between P2P and traditional lenders (de Roure, Pelizzon, and Thakor, 2021). However, factors governing the rising demand for P2P loans remain largely understudied.…”

“…First, our paper is relevant to the fast growing literature on the impact of FinTech on credit markets. A large body of this literature is dedicated to understanding whether FinTech platforms lend more cheaply or provide better products compared to traditional lenders such as banks (Buchak et al, 2018;Tang, 2019;Balyuk et al, 2020;Erel and Liebersohn, 2020;Thakor, 2020;Berg et al, 2021;de Roure et al, 2021;Gopal and Schnabl, 2022). Several related studies explore the technological advantages that FinTech lenders have over traditional ones, and whether they can be effective in reducing search and intermediation frictions in the loan origination process (Bartlett et al, 2021;Fuster et al, 2019Fuster et al, , 2021.…”