Nudge Investors with a Technology Advantage of Online Peer-to-Peer Lending : Evidence from a Large-Scale Randomized Field Experiment

Online peer-to-peer (P2P) lending has emerged as an innovative financial technology (FinTech) platform that renders financial services more convenient than traditional financial institutions. However, only a small portion of retail investors have experience using online P2P lending, and thus attracting investors into the marketplace has been recently a challenge, especially during economic downturns. Despite these challenges and calls for best practices from practitioners, limited literature has been devoted to the optimal interventions of P2P investors that aim to motivate active investing behavior. In this study, we attempt to bridge this critical gap by examining the best nudging messages for P2P investors. Drawing on time-inconsistent preference perspectives and social cognitive theory, we develop a novel set of nudging messages. We not only include nudging messages from the social value orientation framework, such as cooperative or competitive that have been examined in prior contexts but also introduce two novel nudging messages - (i) ease-and-convenience focusing on the unique technological advantage that such platforms provide, and (ii) precommitment focusing on motivating investors towards their long-term investment goals. Interestingly, ease-and-convenience nudging message has garnered insufficient attention from academics and practitioners in spite of depicting advantageous characteristics of technology-based financial services. In collaboration with a popular P2P lending platform, we conducted a large-scale randomized field experiment to nudge P2P lending investors in South Korea. Our results indicate that contrary to other contexts, in the online P2P lending context, ease-and-convenience-framed messages mostly increase investing amounts and decrease the time taken to make an investment decision, compared to the other nudging messages (i.e., competitive, cooperative, and precommitment). Moreover, the results show that this nudging message is most effective for investors who have long tenures with the platform, contrary to what one would intuitively expect. Furthermore, ease-and-convenience nudging is most effective in changing behaviors for risk-averse investors who may have higher psychological barriers and lower self-efficacy and also for non-tech-savvy investors who are unaware of efficient investment opportunities. Our findings have important implications for the novel online P2P investing context to identify the most effective strategies for prompting investors to increase investments and make prudent choices