Trust in Lending

Thakor, Richard T.; Merton, Robert C.

doi:10.3386/w24778

Cited by 40 publications

(26 citation statements)

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“…In particular, we find more activity in the running of Bitcoin nodes in regions with low trust in banks and the financial system. These corroborate the role of distrust in banks, which spread widely in the aftermath of the financial crisis of 2007-2009, being a factor in the early use of other peer-to-peer fintech technologies (see, e.g., Saiedi et al 2017;Bertsch et al 2017;Thakor and Merton 2018). We also find greater supply of and demand for Bitcoin infrastructure in years in which countries undergo inflation crises, potentially indicative of a loss of faith in central-bank issued currencies or using bitcoin as an investment or store of value.…”

Section: Discussion and Limitationssupporting

confidence: 68%

“…In terms of magnitude, a one standard deviation increase in distrust in banks and the financial system equivalent to 31% more distrustful people 18 is associated with an increase of 8 unique bitnode adopters per million Internet users (equivalent to 54% of mean adopters in statistical regions), or an increase equivalent to 34% of the standard deviation of bitnode intensity. These effects are fairly large, and corroborate the role of crisis-related factors and distrust in banks being a factor in the early use of other peer-to-peer fintech technologies (see, e.g., Saiedi et al 2017;Thakor and Merton 2018), in agreement with hypothesis 3b. 19 Model 3 documents region-level social determinants of the adoption of bitcoin by merchants.…”

Section: Social Driverssupporting

confidence: 72%

“…Saiedi et al (2017) and Bertsch et al (2017), show that a decline in trust in banks and financial institutions increases participation respectively, by lenders and borrowers, in online peer-to-peer (P2P) lending markets. Theoretical papers modeling trust-driven substitutions between intermediaries and fintech firms are also emerging (e.g., Thakor and Merton 2018). We thus posit that lower trust in banks and the financial system underlies the emergence and adoption of bitcoins.…”

Section: Trust and Social Attitudesmentioning

confidence: 97%

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Global drivers of cryptocurrency infrastructure adoption

2020

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A vast digital ecosystem of entrepreneurship and exchange has sprung up with Bitcoin's digital infrastructure at its core. We explore the worldwide spread of infrastructure necessary to maintain and grow Bitcoin as a system (Bitcoin nodes) and infrastructure enabling the use of bitcoins for everyday economic transactions (Bitcoin merchants). Specifically, we investigate the role of legal, criminal, financial, and social determinants of the adoption of Bitcoin infrastructure. We offer some support for the view that the adoption of cryptocurrency infrastructure is driven by perceived failings of traditional financial systems, in that the spread of Bitcoin infrastructure is associated with low trust in banks and the financial system among inhabitants of a region, and with the occurrence of country-level inflation crises. On the other hand, our findings also suggest that active support for Bitcoin is higher in locations with well-developed banking services. Finally, we find support for the view that bitcoin adoption is also partly driven by cryptocurrencies' usefulness in engaging in illicit trade.

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Section: Discussion and Limitationssupporting

confidence: 68%

Section: Social Driverssupporting

confidence: 72%

Section: Trust and Social Attitudesmentioning

confidence: 97%

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Global drivers of cryptocurrency infrastructure adoption

2020

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“…Cryptocurrencies are completely based on trust, where trust is transferred from a centralized and regulated repository to trust in technology and decentralization. Without trusted algorithms and data, fintech will fail (Thakor & Merton, ). Any firm developing a new fintech business must consider how it will implement trust through technology.…”

Section: Concluding Comments: the Good And The Badmentioning

confidence: 99%

The future of fintech

Das

2019

Financial Management

143

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This article describes the growing field of financial technology (fintech) and the different financial paradigms and technologies that support it. Fintech is primarily a disintermediation force where disruptive technologies are the drivers. This framework discusses 10 primary areas in fintech comprising a taxonomy, which categorizes research in the field and also proposes a pedagogical structure. Pitfalls of fintech are also analyzed. Overall, the great strides made in computing technology, mathematics, statistics, psychology, econometrics, linguistics, cryptography, big data, and computer interfaces have combined to create an explosion of fintechs.

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“…First, P2P lending is the most widespread form of crowdfunding, 1 and banks and P2P lenders perform similar functions, as both extend debt financing to consumers. Second, trust is a crucial component in banking (Thakor & Merton, 2018;Zucker, 1986). However, in the wake of the recent financial crisis of 2008-2009, trust in banks has nosedived (Sapienza & Zingales, 2012; see also Guiso, 2010;Knell & Stix, 2015), a phenomenon that has been linked to predatory lending methods directed at vulnerable communities (Agarwal et al, 2014), breaching banks' obligations to protect consumers.…”

mentioning

confidence: 99%

Distrust in Banks and Fintech Participation: The Case of Peer-to-Peer Lending

Saiedi

Mohammadi

Broström

et al. 2020

Entrepreneurship Theory and Practice

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What has boosted crowdfunding’s growth? In the case of peer-to-peer (P2P) lending, we highlight the role of consumers’ distrust in banks. We offer evidence that distrust in banks likely triggers individuals to supply funding toward crowdfunding and away from bank deposits. We highlight that a distrust mindset promotes questioning default choices and considering alternatives, and fosters comparisons focusing on dissimilarities. Our findings suggest US states whose residents express greater distrust in banks are more likely to fund P2P loans and, conditional on funding, lend higher amounts. This relationship is more pronounced when funding small loans or borrowers with less banking access.

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Trust in Lending

Cited by 40 publications

References 0 publications

Global drivers of cryptocurrency infrastructure adoption

Global drivers of cryptocurrency infrastructure adoption

The future of fintech

Distrust in Banks and Fintech Participation: The Case of Peer-to-Peer Lending

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