Information and funding decisions in peer-to-peer markets: An exploratory study

This study examines the interaction between soft and hard information in peer-to-peer (P2P) markets, utilizing a survey of 245 participants who evaluated 199 stylized loan requests. The findings reveal that providing both soft and hard information significantly improves funding decisions compared to relying solely on hard information. Soft information enables lenders to identify and support promising borrowers with strong, though marginally insufficient, hard information, while poor hard information effectively mitigates the risk of misinformation. We observe that ambiguity diminishes the influence of soft information, whereas hard information reflecting loan popularity amplifies it through confirmation bias. Consequently, the absence of soft information may impede lenders’ ability to recognize potentially successful borrowers. To ensure the reliability of soft information, P2P platforms should actively monitor its quality and dynamically adjust its prominence. In markets where soft information is generally aligned with borrower quality, platforms may consider de-emphasizing hard data or reducing ambiguity. Conversely, in markets with misaligned soft information, incorporating free-form text and prioritizing hard information can enhance decision-making. These insights offer actionable recommendations for P2P platforms to optimize information presentation and improve loan assessment.