Scheme For Solving The Information Asymmetry Of P2P Lending

The year 2013 is called “the beginning of Internet Finance age”, because Information Technology and Internet Technology bring the finance a great opportunity to solve the information asymmetry and cut the operating cost. P2 P online lending is such an important part of it that plays an core role of microfinance. After an exploding increasing, lots of the P2 P online lending platform collapse. The information asymmetry is still there which should be paid more attention.The information asymmetry theory was initially put forward by Akerlof in his famous paper, which said the good products would disappear while the bad ones would flourish,because of the average price. But now we should know that people in that theory could be so alone, shortsighted and foolish, which actually is not. In real markets, the sellers would be willing to show more information for profits, while the buyers would be able to do something to protect themselves. So the information asymmetry will do break the market efficiency, but it is limited. It's actually an internal feature of this division of labor style economics which can't be eliminated. And it's the basis of finance. This clear understanding would be helpful to our research.This paper summarizes the information asymmetry in traditional financial market and the methods to solve them, then analyze deeply the junction and features of online information asymmetry. The credit relationship is connected by the Internet between strangers, which is different from the traditional private lending. The platforms are built separately while the foreign ones are built in social network. In P2 P lending market, the lending should have diversified price to prevent adverse selection. After knowing this, based on the relevant theory,analyzing the important function and background, this paper provides an idea to design a P2 P online lending platform: for information asymmetry itself, build a social network P2 P platform and standardize the information reveal to produce and transmit more soft information, then select the borrowers with a diversified credit rating model and break the rigid price to realize the value of soft information, for the behavior of borrowers, make use of team-loan and reputation mechanism to choose and supervise the borrowers by themselves, and use special insurance products as the final protect. Then there will be integrated trading mechanism to work on the information asymmetry.