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Crowdfunding: Raising funds from multiple individuals and institutions through online facilitation.
Peer-to-Peer (P2P) Lending: The largest segment of crowdfunding.
Significance: Essential evolution in the FinTech sector.

Initial Role: Facilitators of loan funds and interest repayments.
Auction-Based Markets: Early platforms enabled market-determined interest rates.
Change in Strategy: Leading platforms now set interest rates through internal procedures, moving away from market setting.
Advantages:
- Greater diversification of loans, reducing risk for lenders.
- Platforms resemble investment funds more closely now.
Disadvantage: Loss of unique P2P features, such as lender autonomy in choosing investments.

P2P Lending Growth: Significant competition for banks.
Regulatory Landscape: Initially unregulated; recent shifts towards regulation.
Innovation: Early cost advantages allowed rapid service expansion.

Lending Club: Allows manual investing with diverse borrower assessments.
Funding Circle: Converted to a risk-category model for retail investors; eliminated manual assessing to mitigate confusion.
- Investment Types: Balanced (across credit bands) and Conservative (lower risk credit bands).

Main Risk: Inability to secure requested funding.
Funding Strategies:
- All or Nothing: Full loan must be subscribed; ensures collective lender confidence.
- Keep it All: Loans funded even if not fully subscribed; offers less assurance.

Interest Rate Setting:
- Fixed-Rate Systems: Rates determined internally; faster loan filling but higher default rates.
- Auction-Based Rates: Rates set by market dynamics, potentially lower but slower.
Impact on Borrowers: Fixed rates higher, and faster filling of loans may increase defaults.

Key Metrics: Total loans extended & market valuation of platforms.
Trends:
- Slowing growth in loan origination despite increasing platform activity.
- Institutional investors exerting pressure on interest rates and increasing default rates.

Quick and convenient access to credit, especially for those with poor credit histories.
Efficient funding for small business needs.

Information Asymmetry: Lenders operate with incomplete borrower information.
Types of Information:
- Hard Information: Structured data like income and credit history.
- Soft Information: Informal, harder to quantify data like personal references, valuable yet risky.

Factors impacting Probability of Default (PoD):
- Loan purpose, borrower housing situation, credit history, and borrower indebtedness.
Findings suggest demographic characteristics and financial behaviors significantly related to default risk.

Using algorithms like deep learning to analyze borrowers’ credit data to predict defaults and assign scores.
Complexity increases through multiple hidden layers processing diverse borrower information.

Selling shares in non-listed companies for swift public funding; includes disclosure of crucial business information.
Benefits: Early investment opportunities for individuals.

Donation Crowdfunding: Meshing individual altruism with fundraising.
- Likely driven by emotions rather than rational gain.

Pre-startup: Focus on viability; generally Adoption of donation crowdfunding.
Startup: Transition to lending crowdfunding for capital during development.
Growth: Utilize equity crowdfunding for scale in market expansion.

Firms prefer internal financing over debt; equity financing often indicates financial distress.
Empirical findings suggest equity seekers are less profitable and burdened with higher debt.

Crowdfunding offers entrepreneurs direct access to investors, contrasting with VC’s restrictive processes.
Lower fees associated with crowdfunding poses a challenge for traditional VC.

Crowdfunding and P2P lending are reshaping financial landscapes, offering diverse options for lenders and borrowers alike, along with unique challenges.