The Financial Intermediary Role of Peer-To-Peer Lenders

Barbara Dömötör () and Tímea Ölvedi
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Tímea Ölvedi: Corvinus University of Budapest

A chapter in Innovations in Social Finance, 2021, pp 391-413 from Springer

Abstract: Abstract In recent years, new service providers appeared in many segments of the economy. Financial intermediation is also affected by this new trend. In general, conventional-type banks play the intermediary role of connecting lenders and debtors. Aside from this, banks also own competitive advantages in financial services, such as performing asset transformation, processing information, and monitoring debtors. In the aftermath of the 2008 financial crisis, commercial banks became stricter with respect to their lending activities, providing the space for other, non-traditional forms of financing. The increasingly important role played by alternative financing is also supported by a technological development in finance called FinTech. The largest share of alternative finance is possessed by peer-to-peer lending (P2P), a type of disintermediation that facilitates funding and investment between private individuals through an online platform. P2P platforms contribute to social welfare by extending the advantages of direct finance to smaller-scale lending. Clients, however, should also consider the associated risks. This chapter offers an overview of P2P lending’s characteristics. It identifies the main differences and competitive advantages of these platforms, compared to traditional banks. Although the chapter offers some rational and irrational explanations for the relevance of platform lending, it also highlights the fact that the future of P2P platforms is far from obvious.

Keywords: Financial intermediation; Alternative finance; Peer-to-peer lending; Disruptive financing; Platform lending (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-72535-8_18

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DOI: 10.1007/978-3-030-72535-8_18

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