Become a Reviewer

Reading: The Effect of Digital Platforms on Disintermediation of the Credit Market: Rise of Peer-to-P...

Download

A- A+
Alt. Display

Research

The Effect of Digital Platforms on Disintermediation of the Credit Market: Rise of Peer-to-Peer Lending

Author:

Slava Oganezov

Abstract

The financial crisis of 2008 resulted in a loss of public confidence in traditional
financial intermediaries like banks. People sought alternative business models
to serve consumers’ interests and create a fair financial system. Players driven
by digital technologies started to emerge in the credit sector, including peer-topeer
(P2P) lenders. These companies operate technology platforms that connect
lenders and borrowers, directly facilitating loan deals and disintermediating
banks from the process. Since its origination, this subsector has experienced
exponential growth and become a meaningful force in the industry and growing
field of literature. However, scholars have not compared these new players
to traditional banks to determine whether they facilitate an efficient lending
process. I aim to investigate how the digital platforms used by P2P lenders affect
underlying transaction costs resulting from information asymmetries in the
credit market. To this end, a conceptual framework was developed with a focus
on four key aspects: provision of liquidity, transformation of risk, diversification
of investment and level of agency. Case studies of two UK P2P lending platforms,
Zopa and Relendex, were analysed using the framework. The findings show that
P2P lenders are superior to banks with regards to reducing transaction costs
in three of the four key areas. Therefore, these new intermediaries do indeed
promote the efficiency of the credit market by disintermediating the banking
system.

How to Cite: Oganezov, S., 2020. The Effect of Digital Platforms on Disintermediation of the Credit Market: Rise of Peer-to-Peer Lending. iSCHANNEL, 14(1), pp.28–33.
Published on 06 Jan 2020.
Peer Reviewed

Downloads

  • PDF (EN)