Peer-to-Peer Lenders' Motivations and Risk Perceptions in Cross-Border Investments in Europe

Abstract

This paper examines lenders' perceptions of motivations and risks in p2p lending and how these are related to cross-border activity. We use survey methodology to collect responses to a detailed questionnaire sent to p2p lending platforms' users (lenders) across Europe, allowing us to differentiate between the UK and the rest of the EU (pre-brexit). Results show that UK respondents seem to care more about higher returns and less about interest/excitement when investing via p2p lending, when compared with non-UK respondents. We also find that all risks are perceived to be lower in the case of the UK respondents, a strong indication of higher levels of trust on the entire industry in the UK. On cross-border activity, we find that non-UK respondents are much more willing to invest abroad when compared with their UK counterparts. We also find that p2p lenders who wish to diversify their portfolios prefer to invest through foreign platforms rather than investing in foreign projects that are offered by their own domestic platforms. Our results have important implications for all p2p lending stakeholders, including fundraisers and regulators.