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INFORMATION AND THE POTENTIAL FOR DISRUPTION IN CONSUMER LENDING
BY ADAIR MORSE1 HAAS SCHOOL OF BUSINESS, UNIVERSITY OF CALIFORNIA AT BERKELEY AND NBER
Can peer-to-peer lending (P2P) crowdfunding disintermediate and mitigate information frictions in lending such that choices and outcomes for at least some borrowers and investors are improved? I offer a framing of issues and survey the nascent literature on P2P. On the investor side, P2P disintermediates an asset class of consumer loans, and investors seem to capture some rents associated with the removal of the cost of that financial intermediation. Risk and portfolio choice questions linger prior to any inference.
On the borrower side, evidence suggests that proximate knowledge (direct or inferred) unearths soft information, and by implication, P2P should be able to offer pricing and/or access benefits to potential borrowers. However, social connections require costly certification (skin in the game) to inform credit risk. Early research suggests an ever-increasing scope for use of Big Data and incentivized re-intermediation of underwriting. I ask many more questions than current research can answer, hoping to motivate future research. Keywords: Crowdfunding, Peer-to-Peer Lending, Social Finance, Disintermediation, Marketplace Finance, Screening
Full Report :
CrowdBerkeley is the world’s leading research initiative for crowdfunding and how it applies to innovation, entrepreneurship and social impact.
Crowdfunding and alternative finance are truly interdisciplinary topics, attracting research interest from faculty as diverse as: finance, developmental economics, consumer finance, innovation, computer science, information science, sociology, geography, entrepreneurship, law, public policy, strategy, linguistics, and international development. We welcome the opportunity to collaborate with other faculty, advanced graduate students and institutions and have a small number of visiting researchers and scholars in residence here at UC Berkeley.
Together with visiting researchers and scholars, as well as research associates, we are investigating a number of questions as well as holding symposia, colloquia, and collaborating with other institutions to assist their crowdfunding research. We host an annual Academic Symposium on Crowdfunding each Fall at Berkeley. With the support of the Kauffman Foundation, we have built an extensive repository of crowdfunding data to support empirical research and for the use of governments, NGOs, and policy makers.
CrowdBerkeley is a cross-campus initiative of the Fung Institute for Engineering Leadership, the Haas School of Business Finance Group and the Center for Nonprofit and Public Leadership at the Haas School of Business.