249 research outputs found

    Essays in industrial organization of Peer-to-Peer online credit markets

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    This dissertation consists of three separate essays on Peer-to-Peer (P2P) online credit markets. The first essay presents new empirical evidence of decreases in loan demand and repayment when prices in the market are determined by competing lenders in auctions as compared to the case in which a platform directly controls all prices. The paper develops an econometric model of loan demand and repayment which is then used to predict borrower choices when they are offered prices set by lenders in a market. I find that when lenders set prices, borrowers are more likely to pick loans of shorter maturity and smaller sizes, and repay less. Aggregated at the market level, demand and repayment of credit fall by 10% and 2%, respectively. In the second paper, I quantify the effects of implementation of finer credit scoring on credit demand, defaults and repayment in the context of a large P2P online credit platform. I exploit an exogenous change in the platform's credit scoring policy where the centralized price setting rules ensure that the one-to-one relationship between credit scores and prices remains intact unlike in a traditional credit market where it is broken. The results show that a 1% increase in interest rate due to the implementation of finer credit scoring results in an average decrease of 0.29% in the requested loan amount, an average increase of 0.01 in the fraction of borrowers who default and an average increase of 0.02 in the fraction of loan repaid. These findings contribute to a better understanding of how a reduction in information asymmetry affects borrower choices in a credit market. The third paper explores the main drivers behind the geographic expansion in demand for credit from P2P online platforms. It uses data from the two largest platforms in the United States to conduct an empirical analysis. By exploiting heterogeneity in local credit markets before the entry of P2P online platforms, the paper estimates the effect of local credit market conditions on demand for credit from P2P platforms. The paper uses a spatial autoregressive model for the main specification. We find that P2P consumer credit expanded more in counties with poor branch networks, lower concentration of banks, and lower leverage ratios

    Disrupting Finance

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    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

    A Hybrid Simulation Framework of Consumer-to-Consumer Ecommerce Space

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    In the past decade, ecommerce transformed the business models of many organizations. Information Technology leveled the playing field for new participants, who were capable of causing disruptive changes in every industry. Web 2.0 or Social Web further redefined ways users enlist for services. It is now easy to be influenced to make choices of services based on recommendations of friends and popularity amongst peers. This research proposes a simulation framework to investigate how actions of stakeholders at this level of complexity affect system performance as well as the dynamics that exist between different models using concepts from the fields of operations engineering, engineering management, and multi-model simulation. Viewing this complex model from a systems perspective calls for the integration of different levels of behaviors. Complex interactions exist among stakeholders, the environment and available technology. The presence of continuous and discrete behaviors coupled with stochastic and deterministic behaviors present challenges for using standalone simulation tools to simulate the business model. We propose a framework that takes into account dynamic system complexity and risk from a hybrid paradigm. The SCOR model is employed to map the business processes and it is implemented using agent based simulation and system dynamics. By combining system dynamics at the strategy level with agent based models of consumer behaviors, an accurate yet efficient representation of the business model that makes for sound basis of decision making can be achieved to maximize stakeholders\u27 utility

    From footprint to evidence: An exploratory study of mining social data for credit scoring

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    National Research Foundation (NRF) Singapore under International Research Centre @ Singapore Funding Initiative; Pinnacle Lab for Analytics @ SM

    Marketplace Lending as a New Means of Raising Capital in the Internal Market: True Disintermediation or Reintermediation?

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    Marketplace lending,enabled by technological innovation, represents a new opportunity for raising capital.It is regarded by the EU as having the potential to expand the financing options of SMEs and improve the integration of the Internal Capital Market. However,applying traditional legal categories and existing laws to marketplace lending and to other examples of the new \u201cplatform economy\u201d is not simple. Member States have adopted very different regulatory responses towards marketplace lending, with negative effects on the internal market.The essence of the regulatory dilemma consists in determining whether marketplace lending represents \u2013as it has been depicted by platforms themselves, particularly in contractual agreements through disclaimers \u2013 a true disintermediated method of raising capital, an innovative form of intermediation, or a traditional kind of intermediation disguised in new and fashionable clothing.The answer to this question has relevant consequences for the regulatory treatment of marketplace lending and it requires a uniform response in the EU, at least with respect to the largest cross-border platforms. After briefly describing marketplace lending in Europe and the various current trends in regulating it, the paper discusses the main regulatory issues from the perspective of the above-mentioned issues.It analyzes the recently adopted Regulation on European Crowdfunding Services Providers in order to verify whether the regulatory choices that it has made are effective,both for the further development of marketplace lending and for addressing the associated risks

    Essays on Peer to Peer Lending

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    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

    Sustainability, Digital Transformation and Fintech: The New Challenges of the Banking Industry

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    In the current competitive scenario, the banking industry must contend with multiple challenges tied to regulations, legacy systems, disruptive models/technologies, new competitors, and a restive customer base, while simultaneously pursuing new strategies for sustainable growth. Banking institutions that can address these emerging challenges and opportunities to effectively balance long-term goals with short-term performance pressures could be aptly rewarded. This book comprises a selection of papers addressing some of these relevant issues concerning the current challenges and opportunities for international banking institutions. Papers in this collection focus on the digital transformation of the banking industry and its effect on sustainability, the emergence of new competitors such as FinTech companies, the role of mobile banking in the industry, the connections between sustainability and financial performance, and other general sustainability and corporate social responsibility (CSR) topics related to the banking industry. The book is a Special Issue of the MDPI journal Sustainability, which has been sponsored by the Santander Financial Institute (SANFI), a Spanish research and training institution created as a collaboration between Santander Bank and the University of Cantabria. SANFI works to identify, develop, support, and promote knowledge, study, talent, and innovation in the financial sector
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