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The Effects of P2P Lending on Bank Performance
|Issue Date:||2019-08-07 16:48:18 (UTC+8)|
|Abstract:||With the development of technology, some tech companies already use financial technology to provide financial services to the public like P2P platforms. Will the development of P2P impacts on banks performance? and whether different operation models of P2P will lead to a different result? In this paper, we contribute to this ongoing issue by analyzing banks efficiency and performance before and after P2P showing up in both U.S and UK. First, we find U.S. and UK small time deposits (deposits less than $100,000) in commercial banks went down after 2008 the time which P2P grew up. Second, according to our empirical results, P2P overall makes negative impacts on banking system in the U.S. but not in UK, because the business model of P2P in the U.S. is more like a traditional bank. The result shows that the appearance of P2P indeed brings about the change of people’s financial behavior in the U.S due to higher investment return for investors and lower borrowing cost for borrowers. People have more options to manage their money except saving at banks now, and it harms banks operation in that deposits and loans of banks gets lower than before. At the same time, however, input variables such as fixed assets and labors of banks are still growing, leading to bank efficiency and performance get worse than the time before P2P appearance. But there are also risks on P2P lending platforms such as default risk and the crackdown of P2P. Therefore, governments also have to monitor this issue. They can erect more restricted rules on P2P established, making sure that investors can have more protection.|
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