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The Financial Intermediation Role of the P2P Lending Platforms


The objective of our paper is to explore the role of P2P lending platforms through the prism of the theory of financial intermediation. P2P lending platforms perform the brokerage function of financial intermediaries by matching lenders’ supply and borrowers’ demand of funding, according to the risk and the maturity of their needs. Unlike banks, P2P lending platforms do not create money and do not perform risk and maturity transformation. However, they can organize secondary markets to trade loan contracts before maturity and some P2P lending platforms aim at providing a fixed income to lenders. To ensure efficient and sustainable financial intermediation, P2P lending platforms need to ensure that they are not subject to principal-agent problems and that their incentives coincide with those of lenders. The possibility of orderly resolution of P2P lending platforms failures might decrease moral hazard problems that are inherent in the modern financial intermediation.

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Fig. 1


  1. According to Einav et al. (2016), peer-to-peer platforms share common elements of market design, including the use of search and matching algorithms, pricing and reputation systems.

  2. Depending on the pricing mechanism chosen by the platform, lenders may also exert externalities on each other if they compete to get some funding (which is the case if lenders bid to fund loans in an auction).

  3. Numerous studies document that account activity (credit line usage, limit violations, and cash inflows) substantially improves default predictions and are especially helpful for monitoring small businesses (Norden and Weber 2010; Mester et al. 2007).

  4. It is interesting to draw a parallel with trading mechanisms for securities. There are mainly two categories of trading mechanisms: quote driven and order driven. In quote-driven markets, market makers compete by posting prices at which they commit to buy and sell a given security. Buyers and sellers trade with the market maker who makes a profit from the difference between the bid price and the ask price. In order-driven markets, buy and sell orders interact directly and the price adjust according to the ratio of buy and sell orders. Stock exchanges obtain revenues from: transaction fees, trading data sales and listing fees.

  5. Ratesetter in the UK introduced the first provision fund. Nowadays, most platforms in the UK use them except for Funding Circle. The most important exception to the rule is Funding Circle, the largest SME platform.

  6. Unit cost of intermediation is obtained by dividing the income of the finance industry divided by the quantity of intermediated assets.

  7. Schufa, a German credit bureau, has also abandoned plans to mine Facebook, Twitter and LinkedIn after a public backlash (The Economist 2013).


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We would like to thank Sebastian Schich for useful discussions on this topic.

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Correspondence to Marianne Verdier.

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Havrylchyk, O., Verdier, M. The Financial Intermediation Role of the P2P Lending Platforms. Comp Econ Stud 60, 115–130 (2018).

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  • Peer-to-peer lending
  • Online lenders
  • Market structure
  • Access to finance
  • Financial crisis
  • Internet
  • Information and communication technologies

JEL Classification

  • G21
  • G23
  • G01
  • O33
  • D40