Interpreting infrastructure: Defining user value for digital financial intermediaries.

The 3DaRoC project is exploring digital connectivity and peer-to-peer relationships in financial services. In the light of the near collapse of the UK and world financial sector, understanding and innovating new and more sustainable approaches to financial services is now a critical topic. At the same time, the increasing penetration and take-up of robust high-speed networks, dependable peerto- peer architectures and mobile multimedia technologies offer novel platforms for offering financial services over the Internet. These new forms of digital connectivity give rise to opportunities in doing financial transactions in different ways and with radically different business models that offer the possibility of transforming the marketplace. One area in the digital economy that has had such an effect is in the ways that users access and use digital banking and payment services. The impact of the new economic models presented by these digital financial services is yet to be fully determined, but they have huge potential as disruptive innovations, with a potentially transformative effect on the way that services are offered to users. Little is understood about how technical infrastructures impact on the ways that people make sense of the financial services that they use, or on how these might be designed more effectively. 3DaRoC is exploring this space working with our partners and end users to prototype and evaluate new online, mobile, ubiquitous and tangible technologies, exploring how these services might be extended.Executive Summary: Drawing from Studies of Use - the value, use and interpretation of infrastructure in digital intermediaries to their users. The UK economy has a huge dependence on financial services, and this is increasingly based on digital platforms. Innovating new economic models around consumer financial services through the use of digital technologies is seen as increasingly important in developed economies. There are a number of drivers for this, ranging from national economic factors to the prosaic nature of enabling cheap, speedy and timely interactions for users. The potential for these new digital solutions is that they will allay an over-reliance on the traditional banking sector, which has proved itself to be unstable and risky, and we have seen a number of national policy moves to encourage growth in this sector. Partly as a result of the 2008 banking crisis, there has been an explosion in peer-to-peer financial services for non-professional consumers. These organisations act as intermediaries between users looking to trade goods or credit. However, building self-sustaining or profitable financial services within this novel space is itself fraught with commercial, regulatory, technical and social problems. This document reports on the value, use and interpretation of infrastructure in digital intermediaries to their users, describing analysis of contextual field studies carried out in two retail digital financial intermediary organisations: Zopa Limited and the Bristol Pound. It forms the second milestone document in the 3DaRoC project, developing patterns of use that have arisen on the back of the technical infrastructures in the two organisations that form cases for examination. Its purpose is to examine how the two different technical infrastructures that underpin the transactions that they support–composed of the back-office hardware and software, data structures, the networking and communications technologies used, supported consumer devices, and the user interfaces and interaction design–have provided opportunities for users to realise their financial and other needs. While we orient towards the issues of service use (and its problems), we also examine the activities and expectations of their various users. Our research has involved teams from Lancaster University examining Zopa and Brunel University focusing on the Bristol Pound over approximately a one-year period from October 2013 to October 2014. Extensive interviews, document analysis, observation of user interactions, and other methods have been employed to develop the process analyses of the firms presented here. This report comprises of three key sections: descriptions of the user demographics for Zopa and the Bristol Pound, a discussion about the user experience and its role in community, and an examination of the role of usage data in the development of these a products. We conclude with final analytical section drawing preliminary conclusions from the research presented.The 3DaRoC project is funded by the RCUK Digital Economy ‘Research in the Wild’ theme (grant no. EP/K012304/1)

Essays on Peer to Peer Lending

The Peer-to-Peer (P2P) lending model has become increasingly popular in China in recent years. In 2012, there are only 298 P2P platforms operating in China and loan volume is 22.9 billion RMB while in the first half of 2018, there are 1881 P2P platforms and trading volume has reached 7.33 trillion RMB. Although both number of platforms and transaction volume have increased significantly, severe asymmetric information still discourages participants. This doctoral thesis uses three empirical chapters to investigate the P2P lending market in China. Drawing on Message framing and signaling theory, we first examines the extent to which message framing is associated with funding outcomes receive in the context of P2P lending and whether positive message framing reinforces the positive impact of credit ratings on funding outcomes. Using a Heckman two stage model, we find that the use of positively framed messages is positively associated with positive funding outcomes. Besides, positive message framing enhances the positive impact of the credit ratings (an example of costly signals) on funding outcomes. The results contribute to the literature on the effectiveness of cheap signals in the context of Internet-based interactions while highlighting complementarities between different types of signals in P2P lending. We then investigate the role of psychological distancing and language intensity in P2P funding performance. We bridge the P2P lending literature and psycholinguistics literature and set out to explain how psychological distancing manifested by linguistic styles can influence lenders’ decision on P2P funding campaign. We argue find that linguistic styles related to psychological distancing have a negative impact onare negatively related to P2P funding success. Moreover, the language intensity tends to strengthen the negative relationship between psychological distancing and funding success. Our empirical results provide general support for the argument. This finding is consistent with psycholinguistics literature which suggests that psychological distancing is associated with negative interpersonal outcome (Simmons et al, 2005; Revenstorf et al, 1984). Specifically, the number of “you” and the number of negations used in borrowers’ description are negatively related to the willingness of the lender to support the funding campaign. The intensive language negatively strengths the relationship between the funding performance and number of “you” but does not apply to number of negations. Lastly, we investigate the funding performance of the financial excluded borrower in a large P2P lending platform. The association of financial technology (fintech) and financial exclusion has attracted attention since rapid growth of fintech innovation. Using loan-level data from a lending Chinese P2P company, we find there is a negative indirect effect of financial exclusion on funding success through credit score. In a moderated mediation analysis, we also find new business model such as offline authentication and education qualification positively moderates the linkage between the financial excluded and credit score and therefore negative indirect effect of financial exclusion on funding success is overturned when the excluded borrower has conducted offline authentication and obtained higher education qualification. In the end, we examine the determinants of offline authentication decision. We find the borrowers in a city with better financial infrastructure are more willing to conduct authentication. However, the financial excluded borrowers are less likely to conduct offline authentication

Digital Finance in Europe: Law, Regulation, Governance : Volume 5 in the series European Company And Financial Law Review - Special Volume

Peer reviewe

Digital Finance in Europe: Law, Regulation, and Governance

This special volume collects contributions from leading scholars who scrutinize the challenges digital finance presents for the EU internal market and financial market regulation from multiple public policy perspectives. Author contributions aim to provide policy-relevant research and ideas shedding light on the complexities of the digital finance promise. They also offer solid proposals for reform of EU financial services law

Digital Finance in Europe: Law, Regulation, and Governance

This special volume collects contributions from leading scholars who scrutinize the challenges digital finance presents for the EU internal market and financial market regulation from multiple public policy perspectives. Author contributions aim to provide policy-relevant research and ideas shedding light on the complexities of the digital finance promise. They also offer solid proposals for reform of EU financial services law

Disrupting Finance

This open access Pivot demonstrates how a variety of technologies act as innovation catalysts within the banking and financial services sector. Traditional banks and financial services are under increasing competition from global IT companies such as Google, Apple, Amazon and PayPal whilst facing pressure from investors to reduce costs, increase agility and improve customer retention. Technologies such as blockchain, cloud computing, mobile technologies, big data analytics and social media therefore have perhaps more potential in this industry and area of business than any other. This book defines a fintech ecosystem for the 21st century, providing a state-of-the art review of current literature, suggesting avenues for new research and offering perspectives from business, technology and industry

The Regulation of digital credit in Kenya - The Case for consumer protection

Submitted in partial fulfillment of the requirements of the Bachelor of Laws Degree, Strathmore University Law SchoolThis dissertation seeks to makes a case for consumer protection for digital credit. Digital credit is a form of lending of short term loans while leveraging digital infrastructure. Digital credit is automatic and easily accessible even to those unserved and underserved by the formal financial institutions. Digital credit is therefore a technological tool of financial inclusion. However, if digital credit is not properly regulated, there are chances of the consumers being exploited. This is because of the vulnerable nature of the consumers who are unbanked, poor and financially illiterate. There are various consumer risks that arise as a result of digital credit. The risk of over-indebtedness is the focus risk of the dissertation. The dissertation also makes a comparison with India’s regulatory framework given the rampant use of digital credit in the country and the economic similarity of Kenya and India. The dissertation finally gives a regulatory framework that can be adopted in Kenya to protect these consumers

Advice

This Article seeks to resurrect an ancient technology for enhancing the welfare of others: peer advice. For decisions as variable as whether to eat a marshmallow or which dialysis treatment to undergo, advice-giving is a powerful and as-yet-unrecognized debiasing tool. In fact, it is one of the most comprehensive and effective debiasing tools ever studied. People who succumb to motivated reasoning, hyperbolic discounting, and a host of other biases offer advice that is untainted by them. When advising others, we are more creative, process information and probability more rationally, and see the forest rather than the trees. Far from the blind leading the blind, our friends and family see us and our situation far more clearly than we do. Currently, peer advice is an entirely untapped resource. Promoting, incentivizing, or even sometimes mandating advice can help us improve our decision-making in numerous contexts such as consumer contracts, health care, education, and financial planning

Essays on Peer-to-Peer Lending

This thesis includes three empirical papers focusing on individual’s behaviour in online lending markets. The first chapter uses unique data from a leading P2P lending platform in China, Renrendai.com. We investigate how past loan portfolio performance affects individual investors' decisions to use the auto-investing tool. The estimates suggest that poorly performing investors are likely to switch to the auto-bidding tool after a spell of investment mistakes. At the same time, good performers prefer making decisions themselves in the self-directed mode. Additionally, experience of investors plays an essential role in adopting automation. The findings also provide evidence that the auto-bidding toolbox does not discriminate against borrowers with a specific gender, marital status, and financial literacy characteristics. The second chapter studies the impact of a funding supply shock on loan concentration. Our analysis exploits a quasi-natural experiment involving the 2017 Chinese financial announcement, which imposed restrictions on overseas transfers and transactions. This regulation influenced the money and spending power of investors on Renrendai.com platform. Our data suggest that loans became less concentrated, inferring that investors are less likely to be attracted to listings. In particular, this disinterest is explained by the reduction in interest rates which led individuals to concentrate their attention on more profitable investments. Moreover, borrowers reduced the requested loan amounts and increased the repayment duration to gain investors' trust in repaying their money. The third chapter investigates the impact of experience on decision making in peer-to-peer lending platforms. Our data span from October 2010 until October 2018 and is collected from Renrendai.com. The estimates suggest that experienced lenders are more likely to make suboptimal financial decisions. In particular, as investors become more experienced, they are more likely to become overconfident which makes them attempt more suboptimal financial decisions. Moreover, when investors are considered naïve or inexperienced, they are less likely to experience the impact of overconfidence on their financial outcomes. Lastly, not only are investors less efficient when bidding on loans, but they are also more likely to bid on less profitable loans compared to their portfolio performance

Swimming Against the Tide

An Analysis of Private Sector Development Issues in Small Economies This book examines the underlying factors that determine the environment for investment and growth in small economies, focussing on those in the Pacific.The private sector can flourish and create employment opportunities only if the environment in which it operates is conducive to business. Governments can often create an environment that increases the costs of doing business, reduces profits, and discourages dynamism and entrepreneurship. These issues include • fostering financial sector development for credit to be more readily available for business; • clarifying land rights and modifying them with respect to cultural preservation and the development of land markets; • reducing the role of the state in the economies of the region; • revamping the regulatory regimes for the business environment to be less constrained and monopolies more prudently regulated; • focusing on the assistance of small-scale rural enterprises. With concerted efforts, governments can ensure the resolution of these critical issues. However, doing so requires considerable time and great effort. Nevertheless, now is a perfect time to start the process. Strategies for change should focus on what causes the low rates of return on capital as well as the constraints to business startup and development.private sector development; institutional economics