Throwing Good Money After Bad: Risk Mitigation Strategies in the P2P Lending Platforms

Tianzi Bao, Yi Ding, Ram Gopal () and Mareike Möhlmann
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Tianzi Bao: University of Warwick
Yi Ding: University of Warwick
Ram Gopal: University of Warwick
Mareike Möhlmann: Bentley University

Information Systems Frontiers, 2024, vol. 26, issue 4, No 12, 1453-1473

Abstract: Abstract The success of peer-to-peer (P2P) lending platforms has proven inconsistent and uneven over time and geography. This paper aims to strengthen our understanding of the market evolution through an analysis of risks on P2P lending platforms, which can be significantly affected by the way the platform design, regulatory structural building, nature of the transaction, and interdependencies between organizational components. We extend the social-technical model and create a systematic framework to map and analyze the financial risks from a hybrid financial and organizational approach. By implementing textual and statistical analysis on a dataset from Renrendai platform, we found that risks are generated not only from the stakeholders but also due to the weaknesses of interdependencies between organizational components and platform design. We also utilize our models to investigate why some P2P platforms such as LendingClub and Upstart (US), Renrendai (China), and Zopa (UK) have succeeded or failed from both finance and IS perspectives, and further propose potential risk-mitigation strategies for P2P lending platforms.

Keywords: P2P Lending Platforms; Risk Categorization; Risks Mitigation Strategies; Information Systems Management (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10796-023-10423-4

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