The Research On Pricing Issues Of P2P Lending Platform

With the rapid development of the Internet industry and gradually penetrating into the financial sector, Internet financial has become a hot discussion. As a concrete manifestation of the Internet financial, based on the idea of interconnected networks of peer to peer information interaction, using the Internet technology, P2P lending realizes the interaction of credit information and the transfer of funds between individual and individual. In2005, the first P2P lending platform Zopa was born in Britain. After that, it was rapidly replicated around the world. The first P2P lending platform in China was established in Shanghai in2007. Since then, P2P lending platform appeared and developed rapidly in China. No matter the quantity of the platforms or the trading volumes fact, it was multiplied in years.The development of the P2P lending platform has very special reasons:on one hand, at present there are serious difficulties in micro, small and medium enterprises and personal loans, on the other hand, with the increase of the middle and wealthy class, bank deposits and other low interest products cannot satisfy the needs of investors already. P2P lending platform just matches these needs, so it is welcomed by a lot of group classes. The growth rate of trading volume is as high as300%. Even so, this industry is very competitive. Large number of platform enterprises rushed into the market, in the same time, there was also a significant part of the platform eliminated by the market. There is not a platform announced to achieve positive profitability in this industry so far.Two-sided market theory is a hot research topic in recent years. Especially it has been widely applied to the explanation of the price mechanism of platform industries with the certain characteristics of the market.Using the pricing theory of two-sided market, combining with the economic characteristics of the P2P lending industry, through establishing a pricing model, this paper tries to reveal the pricing characteristics of the platform for both users and the rules of platform competition. The dissertation also helps to find the base of theory for asymmetric pricing and its differentiation strategy and to explain the reasons for industry losses and the elimination of P2P lending platform from the perspective of pricing in different stages. It also tries to demonstrate that P2P lending platform industry has an intensive development tendency. This article is a supplement of P2P lending platform industry research. The innovation is not only to provide a new angle for the research of this industry, but also enlarge the application fields of two-sided market theory. This paper aims to bring benefits to the sustainable development for P2P lending platform industry.Firstly, this paper reviews the basic theory of two-sided market and the development of the platform pricing theory, introducing the origination and development of the P2P lending platform. It illustrates the concept and operation mode of the P2P lending platform, and defines the relevant market. Secondly, this paper analyze the two-sided market characteristics of lending to P2P network platform from the aspects of cross network externalities and the non-neutrality character of pricing structure. It analyzes the switching costs from the special attributions of "credit value has platform limitations to a certain extent". It is an important prerequisite for building a pricing model for P2P lending platform. Thirdly, on the basis of a series of assumptions, this paper establishes the optimal pricing model of platform operators both in the monopoly and oligopoly market and gets some factors which can influence the pricing decisions, and validate the conclusion by cases in reality.The results show that:(1) the P2P lending platform tends to charge more from the borrowers and charge less or free from investors, even the subsidized prices sometimes. This is mainly due to the differences of cross network externalities and the elasticity of demand.(2) Once the borrowers set up their own credibility on a platform which formed the traceable credit report, they become highly dependent on this platform and so are the investors especially when they are familiar with a platform. It produces high switching costs. In this case, the platform will consider grabbing market shares firstly, and then raise prices to get profits in the second stage. Their competitions are always price war or implicit price war. The stronger the homogeneity is, the more intense the competitions are. In the end, there are similar only several or a dozen of similar platforms will be able to survive. P2P lending platform industry has an intensive development tendency.(3) In order to avoid intensive competition, differentiation strategy is a rational choice. The differences of both service quality and market segment will lead higher prices to platform. Finally, this paper argues that the intensive development of P2P lending platform industry may happened naturally and the government can set up supervision system which can increase the threshold of funds. The system can promote the excellent platform to grow up as soon as possible and boost that evolution process artificially and reduce the market cost of trial as well. Although there are certain risks, considering the important role for P2P lending platform in solving the difficulties of micro, small and medium enterprises and personal loans. This article suggests that the government should encourage the healthy and orderly development of this industry and provides three revelatory advices. Firstly, establishing an observation mechanism to keep attention and monitoring. Secondly, establishing a self-discipline organization and setting up self-discipline norms. Finally, improving the personal credit system and promoting the information sharing between credit institutions which based on solid foundation for the healthy development of this industry.