Platform Reputation Effects in Lenders’ Decisions to Invest in Peer-to-Peer Lending in Indonesia

The advancement of financial technology has given rise to the online peer-to-peer lending (P2P lending) platform to provide loans. P2P lending provides loans without the role of financial intermediaries such as banks. Further, P2P lending is expected to increase access to financing for businesses, especially for micro and small businesses, which typically find it difficult to obtain funding from formal financial institutions. However, P2P lending platforms include several concerns to lenders, as they can’t always find the same guaranteed security in P2P lending as conventional banks provide. Thus, we predict that platform reputation is critical in this sector. Specifically, this study aims to determine what factors form investors’ perceptions on P2P lending platform reputation, evaluate the relationship between platform reputation and lenders’ willingness to provide loans, and evaluate whether the trust will strengthen the relationship. Using 160 lenders as respondents, this study was conducted using the regression analysis method with the help of SPSS 23 software to test the proposed models. The results show that security and protection have the greatest influence on platform reputation. Reputation itself was found to have a positive impact on lenders’ willingness to lend; however, trust is found to have no moderating effect and, instead, has a positive influence on the lenders’ investment decisions as an independent variable. Considering that P2P lending can increase SME’s access to finance, the collaboration of conventional financial institutions and technology will create a relationship that benefits both parties. With collaboration, P2P lending platforms can generate a good reputation quickly and economically, while conventional financial institutions can increase customer bases to a wider range of borrowers from the SME sector