Institutions and retail investors in the Peer-to-peer lending market Markus

Abstract

P2P lending is a market that has emerged from the FinTech industry, which aims to provide funding to those who cannot get funding from traditional banks. The market was intended for retail investors, but as the market has matured, larger financial institutions have begun to take an increasing part in the market. It is speculated that investors will outperform retail investors due to their capital powers and investment strategies, as they compete in the same market for a fixed amount of assets. This paper aims to deepen our understanding and find supportive documentation for these speculations. We have defined our research question: “Will institutionalization of the P2P lending market have a negative effect on the retail investor?” To answer this question, we have primarily used a quantitative approach with supportive secondary research papers to confirm our findings. The quantitative approach included several regression models and an evaluation of descriptive statistics from the dataset retrieved from Prosper Marketplace. Our results were supportive of our research question and prove that institutional investors outperform retail investors in the market of P2P lending.