Competitive frontiers in P2P lending crowdfunding

Lending-based crowdfunding or peer-to-peer (P2P) lending is a major expression of ‘alternative finance’ and is often considered in two components: P2P consumer lending or personal finance for private consumption, and P2P business lending for small and medium-sized enterprises. P2P lending can be defined as the collection of financial resources and the issue of loans via web platforms. Hence, a new financial circuit is created with respect to the traditional financial circuit operating in credit and financial markets. A crucial question emerges about whether this new circuit is complementary or alternative to traditional financial intermediation. This chapter firstly describe how P2P lending platforms work and how P2P lending has spread in the past few years. Second, we sketch the characteristics of P2P lending to illustrate the causes of its recent strong development and to identify traits that may assist us in defining its future outlook. Third, we focus on the competitive advantages of P2P lending platforms and on issues and risks stemming from their operating model.