Research On The Transformation Of P2P Network Lending Platform Operation Mode

While the P2P industry in China is experiencing an extensive growth,most platforms are changing their operation mode gradually.Generally,there are two operation mode widely applied by most P2P platforms:online operation mode and offline operation mode.The former one requires that the platform only serves as information intermediary between lenders and borrowers.However,the latter one implies that the platform can participate in the transaction process by various means,such as being credit rating agencies for their borrowers.Thus,platforms choose different operation mode according to their different business situations,and moreover,they can change their operation modes when the market environment is changing tempestuously.Take"renrendai.com" as an example,the platform is gradually turning its operation mode from online mode to offline mode.The "renrendai" company brings a new "field-audit"list,of which the platform conducts risk assessment by field visit,replacing the previous main product "credit-audit" list.With the "field-audit" list becomes the most favorite financial product to investors,the company has already turned its previous "no-promise"mode to recent "safety-promise" mode.To explore and explain the reasons and results of this phenomenon,this essay chooses "renrendai" platform as researching target,collecting its transaction data from 2010 to 2015 and finally analyzing 800,000 borrower lists..This essay use principle-agent theory and signal game theory to make an explanation of this phenomenon.In classical principle-agent model,this article assumes that investors can analyze and utilize borrowers' information offered by platforms effectively.Therefore,it is reasonable to suggest that investors will properly allocate their time and energy to collect and analyze borrowers/information and maximize their expected return of investing a bundle of lists.Based on investors/rational behavior,P2P platforms will adjust the proportion of their "no-promise" and "safety-promise"products.With these classical assumptions,platforms will finally turn into online operation mode to maximize their profits.However,if the assumption of investors changes,the result various.Suppose that investors cannot distinguish the potential default risk of borrowers due to serious asymmetric information problem,the market will act like a signal game model.In this time,platforms will investigate the real credit level of borrowers and provide guarantee of those high level borrowers.As a result,most platform will choose offline operation mode as their responses.To test this hypothesis,this essay use logistic regression to analyze the relationship between loan's success rate and borrower's several features and the relationship between loan's default rate and borrower's several features.The analysis of the regression results shows that investors cannot effectively distinguish different borrowers through the information provided by P2P platforms.Investors begin to doubt the credibility of those information directly provided by borrowers,and they start to rely on the credit certificate information offered by platforms.Moreover,the result shows that the information disclosed by platforms cannot help investors to avoid default risks effectively.Therefore,this essay confirms that the credit system of the platform is losing its impact to investor's decision-making-investors cannot utilize the credit system to separate good borrowers to risky borrowers.Thus,the platform choose to audit borrowers by its assessors,promising a safety bond to the list offered by a A+credit level borrower.In this case,the promise of the platform is a signal to help investors to distinguish different borrowers.Based on the regression results,this essay shows that the reduction of the utility of information is an important cause for P2P platforms to change their operation mode.Based on this conclusion,this article suggests that the government supervision department should not only focus on improve the information transparency of those P2P platforms,but also should improve the information usability of the whole industry.Besides that,building a useful public credit rating system can relieve this problem as well.