Distrust in Banks and Fintech Participation: The Case of Peer-to-Peer Lending
53 Pages Posted: 16 Feb 2018 Last revised: 15 Sep 2020
Date Written: February 15, 2018
What has boosted crowdfunding’s growth? In the case of peer-to-peer (P2P) lending, we highlight
the role of consumers’ distrust in banks. We offer evidence that distrust in banks likely triggers
individuals to supply funding toward crowdfunding and away from bank deposits. We highlight
that a distrust mindset promotes questioning default choices and considering alternatives, and
fosters comparisons focusing on dissimilarities. Our findings suggest US states whose residents
express greater distrust in banks are more likely to fund P2P loans and, conditional on funding,
lend higher amounts. This relationship is more pronounced when funding small loans or borrowers
with less banking access.
Keywords: Peer-to-Peer Lending; Crowdfunding; Distrust in Banks and Financial Institutions; FinTech.
JEL Classification: G20,
Suggested Citation: Suggested Citation