CEU Electronic Theses and Dissertations, 2024
| Author | Cunat Loranth, Zsofia |
|---|---|
| Title | Fintech's Power Play: The Impact of Bank Competition on P2P Lending |
| Summary | This thesis examines how bank competition affects the pricing and markets served by peer-to-peer (P2P) lending platforms, focusing on the interaction between traditional banks and fintech companies. The thesis takes advantage of a large dataset from LendingClub, a formerly dominant lending platform in the United States, covering the period from 2012 to 2019 and combines it with state level data about the banking sector from the FDIC and federal funds rate data. It conducts a multivariate regression analysis to uncover these interactions. The findings show that higher bank competition, measured by the Herfindahl Hirschman Index (HHI), is associated with higher risk premiums and lower default probabilities on P2P lending platforms. These findings suggest that in competitive markets where traditional banks charge higher interest rates to mitigate adverse selection risks, fintech companies can minimally undercut bank rates, while maintaining profitability and loan quality through advanced screening technologies resulting in decreased loan defaults. Smaller loan sizes, typically associated with less creditworthy borrowers, are particularly sensitive to changes in bank competition, resulting in higher interest rates. The study provides some insights into the competitive role of fintech in the financial landscape, highlighting how P2P platforms can thrive even in highly competitive environments by utilizing innovative data sources and technologies. |
| Supervisor | Lee, Tomy |
| Department | Undergraduate Studies BA |
| Full text | https://www.etd.ceu.edu/2024/cunat-loranth_zsofia.pdf |
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