Aims and methods
Our approach
This research project investigates the ability of marketplace lending platforms to promote sustainable finance by applying theoretical, empirical and experimental research methods from finance, economics, information systems and psychology.
Marketplace lending and transaction costs
To investigate the question under which circumstances marketplace lending platforms can actually reduce transaction costs compared to banks and (imperfect) markets, we use an extended model by Diamond (1984).
We analyze whether better screening technology and a faster and more efficient loan application process of the marketplace lending platform can outweigh the advantages that a bank offers as an intermediary.
Marketplace lending, sustainability and digital nudging
The question of the interaction between marketplace lending and environmental and social sustainability (ESS) will be answered in two ways.
The first approach is empirical in nature and aims to understand the relationship between ESS financing and the structure of corporate debt.
The second approach examines the design elements of marketplace lending that promote the ability of investors to overcome the intention-behavior gap and increase the likelihood of sustainable investments. These design elements can be divided into two categories: Supportive and Nudging. To this end, a meta-analysis of studies examining the two groups of design elements of choice architecture is conducted to identify relevant elements from an empirical perspective.
Marketplace lending and trust
Marketplace lending platforms are required to communicate their expertise in the pre-selection of investment opportunities and to support and guide investors in their decisions (Selinger & Whyte (2010)).
This raises two questions:
First, do the supportive design elements of choice architecture give investors the sense that they are capable of making confident investment decisions that match their preferences?
Secondly, are the nudging design elements of choice architecture perceived as subtly steering investors towards their preferences or as manipulating their investment decisions?
Combined, the aim is to investigate whether the two sets of design elements in isolation and interaction with each other increase or undermine trust in marketplace lending platforms and whether investors perceive them as beneficial.
Marketplace lending and financial inclusion
The initial focus is on the question of whether the spread of marketplace lending improves financial inclusion. The underlying assumption that allows this question to be analyzed using aggregate data is that financial inclusion through broader access to credit increases the likelihood that projects with a positive net present value will be financed, leading to higher economic growth.
The second step is to investigate how marketplace lending platforms improve financial inclusion. Is this outcome achieved by freeing borrowers from financial constraints, or by simply enabling excessive borrowing and thus an unsustainable financial situation for individuals?
Diamond, D. (1984). Financial Intermediation and Delegated Monitoring. Review of Economic Stud- ies, 51(3), 393-414.
Selinger, E., & Whyte, K. P. (2010). Competence and trust in choice architecture. Knowledge, Technology & Policy, 23(3-4), 461-482.
