Disintermediated finance peer-to-peer lending and payday loans

Seminar paper from the year 2016 in the subject Economics - Finance grade: 17 University of Marburg (Accounting & Finance) course: Seminar Empirical Finance language: English abstract: In the following paper I want to give an insight in two financial markets the online peer to peer lending market and the payday loan market. Both are examples for disintermediated finance. Disintermediation means to withdraw funds from intermediary financial institutions such as banks and savings/loan associations in order to invest them directly. Simply put in disintermediated finance one gets rid of the middleman or intermediary.This paper is organized as follows. At first Chapter 2 will look into the online peer to peer market of Prosper.com. Therefore I will analyse a paper of the authors Lin Prabhala and Viswanathan (2013) called Judging borrowers by the company they keep: Friendship networks and information asymmetry in online peer-to-peer lending. In Section 2.1 I will start with an introduction to the market and the author's intention. Section 2.2 will explain the system of the online platform Prosper.com. The following section will outline the empirical results of the authors in order to express the result's implication in the last section of chapter 2. Chapter 3 will continue with payday loans. The first section 3.1 gives an introduction into payday loans and explains how the industry of payday loans works. The second section 3.2 will analyse one specific paper of Adrian Morse (2011) called Payday lenders: Heroes or Villains? The last section 3.3 will give a summary of the author's findings and question them critically.