Fintech Financial Deepening: Evidence in Peer-to-Peer Lending in China

Zhao Zhao, Fordham University


This research has three main chapters, with emphasis on examining whether, and to what extent Peer-to-Peer (P2P) lending as a representative of FinTech innovation strengthens or dampens the role of financial deepening on growth. To date, P2P lending has existed for a decade after 2008 financial crisis. There are debates on whether P2P lending is efficient in improving credit market social welfare. The main idea for my research is to measure, first whether P2P lending used alternative information, and to what extent, alternative information can be used to decide funding and default outcome. Second, for the level of financial deepening, whether P2P lending shortens funding process, helps individual and SMEs in regions lack-of financing resources with less credit record. In another words, whether P2P lending benefits people who are urgently need money. While the growth of nonbank lending like P2P lending may raise some regulatory concerns, especially this market is less regulated comparing with traditional institutions. Third, my study also tries to exploit policy interventions on the demand of P2P lending and analyze lending results under policy intervention. If regulatory policy has influence on funding outcome, improving loan repayment quality, then we can summarize that P2P lending is under regulatory department control. In addition, If P2P lending platforms and their ability to use nontraditional alternative information sources to collect soft information about creditworthiness may provide significant value to households and small business owners, especially for those with little or no credit history. The P2P lending as a part of diversified investment channel is good for social welfare. My findings suggest that P2P lending overall increased social welfare in credit market especially in the use of alternative information. Also, the study finds that the first P2P regulatory policy seems weak and less efficient in affecting funding and default. There is a negative impact from bank loan rate to P2P loan rate. Moreover, no obvious regional biases in funding and default. And I do not find strong relationships from P2P loans to margin trading account and stock market. One implication in improving P2P lending market from my research is that using alternative information which can be verified is more meaningful in funding, repayment and risk management.

Subject Area

Asian Studies|Economics|Finance

Recommended Citation

Zhao, Zhao, "Fintech Financial Deepening: Evidence in Peer-to-Peer Lending in China" (2019). ETD Collection for Fordham University. AAI13864266.