We develop a simple theoretical model to motivate testable hypotheses about how peer-to-peer (P2P) platforms compete with banks for loans. The model predicts that (i) P2P lending grows when some banks are faced with exogenously higher regulatory costs; (ii) P2P loans are riskier than bank loans;...

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...

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...

This paper shows how to improve the measurement of credit scoring by means of factor clustering. The improved measurement applies, in particular, to small and medium enterprises (SMEs) involved in P2P lending. The approach explores the concept of familiarity which relies on the notion that the...

Globally, the regulation of P2P lending has evolved significantly in recent years, with mostly beneficial effects on the diversification of funding for individuals and corporations. Regulatory responses have varied greatly between countries, and the characteristics of the markets that have...

Supersedes Working Paper 17-17. Fintech has been playing an increasing role in shaping financial and banking landscapes. There have been concerns about the use of alternative data sources by fintech lenders and the impact on financial inclusion. We compare loans made by a large fintech lender...