Abstract
AbstractThe advance of Internet technology has provided a convenient market platform for matching lending and borrowing parties, but many consumers still hesitate to use online borrowing. To better understand consumer behaviour in online borrowing, we use nationally representative survey data in China to explore factors affecting consumer use of one type of online borrowing, person to person (P2P) borrowing. Through empirical analyses, we find that financing knowledge and risk attitude are two key factors associated with P2P borrowing. Results show that financing knowledge is directly associated with P2P borrowing, while risk attitude through an instrument variable is associated with P2P borrowing also. Given these results, an effective way to expand the consumer Internet borrowing market in China is to enhance consumer financial literacy education.
Highlights
Research on traditional credit market concentrates on business financing behavior
This study explored factors associated with consumer use of P2P borrowing
We find that two main factors for P2P borrowing are risk attitude and financing knowledge
Summary
Research on traditional credit market concentrates on business financing behavior. due to the advance of modern Internet technology, more consumers choose borrowing from Internet. Internet financing is a special type of credit market in which individual borrowers make microloans online without collateral or intermediation from financial institutions. P2P (person to person) lending is one of methods for Internet financing, in which individuals lend money to individual borrowers directly (Gomber et al, 2018). The Internet financing industry explosion began in 2013, when there was a surge in the number of online platforms. 150 platforms were set up in 2013, accounting for 50% of the total number of Internet financing platforms in China. Credit Ease, a major peer-to-peer lending company, was established in 2010, enabling individuals with surplus funds to lend to others who want money. Like Lending Club in the US, Credit Ease is the biggest Internet financing platform in China (Iresearch, 2017)
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