Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/189946
Authors: 
Bertsch, Christoph
Hull, Isaiah
Qi, Yingjie
Zhang, Xin
Year of Publication: 
2017
Series/Report no.: 
Sveriges Riksbank Working Paper Series No. 346
Abstract: 
We study the impact of trust on the expansion of online lending in the U.S. over the 2008-2016 period. Using data from the largest platform, we demonstrate that a misconduct-driven decline of trust in traditional banking is associated with a statistically and economically significant increase in online lending at the state level. To the contrary, increased social trust strengthens in-person, bank-based borrowing and informal borrowing, reducing the demand for impersonal online lending. Both of these effects operate primarily through borrowers. We also use a shock that affects only investors to demonstrate that distrust in traditional finance increases participation in online lending.
Subjects: 
financial development
consumer loans
bank misconduct
FinTech
JEL: 
A13
G00
G21
K00
Document Type: 
Working Paper

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