Harnessing collective intelligence in P2P lending

Henry K. Dambanemuya, Emoke-Agnes Horvat

Research output: Chapter in Book/Report/Conference proceedingConference contribution

1 Scopus citations

Abstract

Crowd financing is a burgeoning phenomenon that promises to improve access to capital by enabling borrowers with limited financial opportunities to receive small contributions from individual lenders towards unsecured loan requests. Faced with information asymmetry about borrowers' credibility, individual lenders bear the entire loss in case of loan default. Predicting loan payment is therefore crucial for lenders and for the sustainability of these platforms. To this end, we examine whether the "wisdom" of the lending crowd can provide reliable decision support with respect to projects' long-Term success. Using data from Prosper.com, we investigate the association between the dynamics of lending behaviour and successful loan payment through interpretable classification models. We find evidence for collective intelligence signals in lending behaviour and observe variability in crowd wisdom across loan categories. We find that the wisdom of the lending crowd is most prominent in the auto loan category, but it is statistically significant for all other categories except student debt. Our study contributes new insights on how signals deduced from lending behaviour can improve the efficiency of crowd financing thereby contributing to economic growth and societal development.

Original languageEnglish (US)
Title of host publicationWebSci 2019 - Proceedings of the 11th ACM Conference on Web Science
PublisherAssociation for Computing Machinery, Inc
Pages57-64
Number of pages8
ISBN (Electronic)9781450362023
DOIs
StatePublished - Jun 26 2019
Event11th ACM Conference on Web Science, WebSci 2019 - Boston, United States
Duration: Jun 30 2019Jul 3 2019

Publication series

NameWebSci 2019 - Proceedings of the 11th ACM Conference on Web Science

Conference

Conference11th ACM Conference on Web Science, WebSci 2019
CountryUnited States
CityBoston
Period6/30/197/3/19

Keywords

  • Crowdfunding
  • Crowdsourcing
  • Decision-Making
  • Dynamics
  • Herding
  • Signalling
  • Wisdom of Crowds

ASJC Scopus subject areas

  • Computer Networks and Communications

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