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Peer-to-Peer Crowdfunding: Information and the Potential for Disruption in Consumer Lending

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  • Adair Morse

    (Haas School of Business, University of California, Berkeley, California 94720; and National Bureau of Economic Research, Cambridge, Massachusetts 02138)

Abstract
Can peer-to-peer lending (P2P) disintermediate and mitigate information frictions in lending so 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 may be able to capture rents associated with the removal of a layer of 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. Thus, P2P may be able to offer pricing and/or access benefits to potential borrowers. Early research suggests that the future of consumer lending will involve more big data and reintermediation of underwriting by all types of financial institutions. I ask many more questions than current research can answer, hoping to motivate future research.

Suggested Citation

  • Adair Morse, 2015. "Peer-to-Peer Crowdfunding: Information and the Potential for Disruption in Consumer Lending," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 463-482, December.
    • Handle: RePEc:anr:refeco:v:7:y:2015:p:463-482
    DOI: 10.1146/annurev-financial-111914-041939
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    More about this item

    Keywords

    crowdfunding; disintermediation; marketplace finance; peer-to-peer lending; screening; social finance;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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