The Characteristics of Peer-To-Peer Applicants

Abstract

In recent years, the differing forms of social lending have become a widely researched area. One of the most extensive business models is peer-to-peer lending (P2P), in which an online platform connects lenders and borrowers. The segment’s rapid growth has attracted the attention of market participants and created a deeper understanding of this new form of financial intermediation. The purpose of this article is to contribute to the existing literature by examining the borrower side of P2P lending. The analysis is based on a unique, manually collected dataset from a market-leading platform in the United States. We use LASSO regression to examine the relationship between applications and a wide range of local microeconomic and socioeconomic indicators. Then we apply k-means cluster analysis to identify borrower groups with similar characteristics. The results indicate a strong positive correlation between the portion of mortgage delinquency and demand for P2P funding. Furthermore, the platform’s customer base significantly overlaps with bank clients.