Impact of marketplace lending on consumers’ future borrowing capacities and borrowing outcomes

Using comprehensive credit bureau data, we document that consumers who borrow from marketplace lending (MPL) platforms have lower credit scores and higher default rates in the long run relative to observably similar applicants for bank loans. The long-run credit scores and default rates of MPL borrowers are especially worse when the MPL platforms provide less information to MPL investors, when MPL borrowers are benchmarked against relationship bank borrowers, and for one-time MPL borrowers as compared to repeat MPL borrowers. Overall, our results suggest that MPL lenders face greater information asymmetries with respect to their borrowers than traditional banks.