Indonesian Peer to Peer Lending (P2p) at Entrant’s Disruptive Trajectory

Abstract

Peer to peer (P2P) lending in Indonesia has been growing rapidly, therefore there is the potential for disruptive innovation processes in the financial sector. The aim of this study is to examine the impact of the growth of P2P lending on the growth of bank lending for micro, small and medium enterprises (MSME) and Non-MSME debtors. Separating the scale of the debtor is important, given the initial process of disruptive innovation of reaching areas that are not the incumbent’s main target. The examination was conducted in this study using panel data regression, whereby the examination was done in stages. This was an overall examination without differentiating between the regions, further examination conducted with more detail by separating between the loans inside and outside Java Island. This is because the economic structure in Indonesia is still dominated by the regions in Java, but FinTech is generally able to grow in areas with less developed local economies. The result of this study is consistent overall, Java and outside Java Island, as shows that the growth in P2P lending in Indonesia does not have a significant impact on the growth of bank loans for Non-MSME lending. However, it does have a negative impact on the growth of bank loans for MSME lending. This is in line with the entrant’s disruptive trajectory process by which the entrants enter the competition through an underserved market (niche markets) and not through the main target market of the incumbent (MSME).

Intention to use Peer-to-Peer (P2P) Lending: The Roles of Perceived Structural Assurance and Perceived Critical Mass

“…The implication is clear: P2P lending firms should emphasize the many benefits and features that would entice borrowers to utilize their service. For instance, they can focus on how P2P lending services could reduce time and place barriers in performing financial transactions (Nuryakin et al, 2019), replace traditional banks to borrow money for the unbanked due to their more lenient requirements (Kohardinata et al, 2020), provide borrowers with the most competitive interest rate, loan tenor, as well as limit compared to other financing alternatives (Ghazali et al, 2019), process and approve the loan requests a lot faster than competitors (Pohan et al, 2020), among others.…”

“…Specifically, the exogenous construct could indirectly influence the IS adoption through perceived usefulness as the mediator since the direct path is not significant. In this regard, P2P lending firms should provide the structural assurance that many borrowers are concerned about, including the lack of consumer protection, privacy concerns regarding personal information (Abubakar & Handayani, 2018), the enactment of proper regulation of FinTech and P2P lending by the Financial Services Authority/OJK (Anugerah & Indriani, 2018) and comprehensive enforcement of said regulation to ensure that there are no misconducts attempted by P2P lending firms (Kohardinata et al, 2020), the sweeping eradication of illegal P2P lending players (Hidajat, 2019;Sitompul, 2019), and many more. Proper structural assurance could also ensure that borrowers are not caught in the vicious cycle of having to apply for loans with no end in sight (Yunus, 2019).…”

A Bibliometric mapping of peer-to-peer lending research based on economic and business perspective

“…In the financial industry, peer-to-peer lending has a largerly complementary role with banks because peer-to-peer lending can cover the market share of risky credit and borrowers who do not have collateral that banks cannot reach ( Milne and Parboteeah, 2016 ; Kohardinata et al., 2020b ). Moreover, banks and peer-to-peer lending can also collaborate in providing loans where banks can act as institutional lenders who channel their loans to potential lenders through peer-to-peer lending platforms ( Kohardinata et al., 2020a ). Thus, there is no possibility that the role of banks in funding distribution will decrease significantly.…”

Detection of fintech P2P lending issues in Indonesia

“…The loan process, loan costs, interest, loan amount, and loan flexibility affect SMEs to get loan funds ( Rosavina et al., 2019 ). However, gaps exist where the research results by Kohardinata et al. (2020) show that P2P lending growth in Indonesia does not significantly affect bank credit growth.…”

“…This happens because the platform enters the competition through a less attractive market to the public. After all, it is still in the process of developing product and service quality ( Kohardinata et al., 2020 ). Several adoption models emerged and saw that the perceived benefits were an important and significant factor affecting adoption.…”