The Value of "New" and "Old" Intermediation in Online Debt Crowdfunding

We study the welfare effects of the transition of online debt crowdfunding from the older "peer-to-peer" model to the "marketplace" model, where the crowdfunding platform sells diversifiedloan portfolios to investor. We develop an equilibrium model of debt crowdfunding capturingplatform design (peer-to-peer or marketplace) and lender preferences over loan and portfolioproduct characteristics, and we estimate it on a novel database on credit at a large onlineplatform based in China. Moving from the peer-to-peer to the marketplace model raises lendersurplus, platform profits, and credit provision. At the same time, reducing lender exposureto liquidity risk can be beneficial. A counterfactual scenario where the platform resembles abank by bearing liquidity risk has similar welfare properties as the marketplace model whenliquidity is high, but results in larger lender surplus and credit provision, and only moderatelylower platform profits, when liquidity is low