Page - 214 - in Digital Entrepreneurship - Impact on Business and Society

assessment. If the borrower accepts the offered the proposed conditions, the funds are transferred to the provided bank account, and the borrower repays the loan to the platform on amonthly basis. The platform collects themonthly payments and transfers them to each backer on the basis of the amount funded. A key differen- tiator of online P2P loans when compared to traditional banking loans is that borrowers have the flexibility to make lump sum payments or repay their loans early at no extra cost. This flexibility, together with short approval times, is par- ticularly valuable for businesses that face temporary liquidity needs. The interest rates charged by P2P lending platforms are on average higher than the ones offered by traditional financial institutions. This reflects the fact that P2P loansare typically riskier than theones fundedbybanks (deRoureet al. 2016).P2P loans aremostly unsecured, and the access requirements for businesses are not as strict as the ones imposed by banks. For LendingClub, for example, a company would need to have been in business for a minimum of 12months with at least $50,000 in revenues.3 As such, P2P lending platforms are complementary to tra- ditional financial institutions as it allows riskier borrowers, which could not be served by banks, to obtain access to capital (de Roure et al. 2016). However, P2P lending platforms are also competingwith traditionalfinancial institutions for low risk borrowers (Tang 2019). In fact, investors (i.e. lenders) bear all the risk in P2P lending, and akeymetric for them to evaluate platforms is default rate.As a result, Table 4 Size of P2P lending funding by region and segment Region P2P consumer lending P2P business lending 2015 TheAmericas 18.00 2.60 Asia Pacific andChina 52.78 39.99 Europe 0.40 0.23 Middle East andAfrica 0.01 0.02 2016 TheAmericas 21.10 1.30 Asia Pacific andChina 137.02 58.51 Europe 0.73 0.37 Middle East andAfrica 0.03 0.03 2017 TheAmericas 14.90 1.50 Asia Pacific andChina 225.26 98.05 Europe 1.39 0.47 Middle East andAfrica N/A N/A NotesAll figures are reported inUSD/billions Sources Cambridge Centre for Alternative Finance (2017a, b, 2018a, b, c, d), Cummins et al. (2019) 3https://www.lendingclub.com/business/?utm_source=LC&utm_medium=link&utm_campaign= pl_top_nav&u=1. 220 T. Lynn and P. Rosati