91: Behavioral Finance in P2P Lending with Laura Gonzalez

Invest Like a Boss

Sam Marks Johnny FD Derek Spartz

Business, Investing

4.8 • 518 Ratings

🗓️ 12 April 2018

⏱️ 65 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

Laura Gonzalez is an Associate Professor in Finance at California State University with over 10 years of experience in teaching finance courses. One of the studies she took interest in is behavioral finance in peer to peer (P2P) lending which they conducted an experiment on it.

During the episode, Laura reveals the major biases of lenders in terms of approving loans apart from their credit information. She explains the theory of beauty premium which significantly influence the decision of lenders. She also explains how they conducted the experiment to test this theory and what considerable indications were acquired.

Where we are:

Sam - Florida

Johnny - Nepal

References:

www.Lendingstats.com

Discussed:

ILAB 13 - PeerStreet vs. Lending Club

ILAB 45 – Behavioral Finance and How Betterment is Optimizing Around It

Time Stamps:

05:31 – Laura’s background

07:07 – History of P2P lending

11:40 – Growth of the P2P market

13:09 – P2P platforms

16:08 – Major biases in approval of loans

19:22 – Beauty Premium

24:01 – The conduct of the experiment

25:02 – Findings and indications

30:00 – Outcome based on biases

32:39 – What to consider when lending someone

34:49 – Information available on Prosper

37:02 – Repayment success rate in various countries

39:23 – Prosper vs. Lending Club

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Transcript

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0:30.7	Welcome to the Invest Like a Boss podcast. I'm Sam Marks and I'm Johnny FD. We're self-made
0:35.5	entrepreneurs who invest our own money and use modern technology to invest like a boss.
0:39.2	Join us each week for exclusive interviews with our network of modern investors, business owners, and multimillionaires to discover new ways to invest our hard-earned cash.
0:48.2	Hey guys, it's Johnny and welcome to episode 91 of the Invest Like a Boss podcast. I'm here in the middle of the jungle in Chitwan, Nepal,
0:57.9	and Sam, you are in Florida? I'm in the safe, secure, vanilla city of Tampa, Florida.
1:04.9	Man, I am literally probably like 30 feet away from this river crossing where there's crocodiles
1:13.5	and there's a rhinoceros right across the way well you sound very bossy I guess I assume you
1:19.2	probably got a 4G card versus some some crappy hostile Wi-Fi yeah I was trying to
1:27.2	talk to you on on Wi-Fi. It just didn't work. So good
1:30.4	travel tip is always have a SIM card back up. It's funny how in a country like Nepal, the 4G service
1:37.1	will be better than the big carriers in the US. I've had more trouble going across the US with T-Mobile
1:44.0	SIM card. You'd think that we're living in a third world developing country. Yeah. I've had more trouble going across the US with T-Mobile SIM card. You'd think that we're
1:45.5	living in a third world developing country. Yeah, I've actually heard that places like in Africa,
1:50.7	they were mobile first or sometimes mobile only where they kind of just skip the entire
1:55.9	landline Wi-Fi thing. So everything is 4G and it works better than, you know, Australia or the U.S.
2:04.4	or a lot of these big countries. Well, we're playing catch up here in the U.S. in a lot of ways,
2:09.2	but in some ways we have a lot of good things, including investing opportunities.
2:15.3	And Johnny, this week, I guess we should dive into some behavioral finance, peer to peer
2:20.2	lending, I presume.
2:21.7	Yeah, this is actually really exciting because it's one of those things where, it's one of those
	...

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