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Risks and Returns in Peer-to-Peer Lending: Comparing European FinTech Platforms
October 21, 2020 at 6:00 pm
Sophia Johan, Florida Atlantic University
Wednesday, October 21, 6:00 pm EDT
FinTech, particularly digitalized funding, has emerged in recent years as an innovative way to finance new ventures. However, funding mediated on digital platforms can be particularly risky, prone to failures and inefficiencies. We investigate whether peer-to-peer lending, one of the most potentially disruptive forms of digital funding, provides investors with returns consistent with the level of borne risk. By studying over 3000 loans mediated on 68 European platforms we show that the returns are inversely related to loans’ riskiness, suggesting that, on average, loans are mispriced. Our results have important implications for understanding the extent to which financial regulators could be involved in this rapidly growing segment of FinTech.
Sponsored by the Center for European Studies at the University of Florida