Research On Trust Mechanism Of P2P Network Borrowing Platform In China

Online market for Peer-to-Peer (P2P) lending, where individuals make unsecured microloans to other individual borrowers. Initialized by groups in online social networks, first commercial online P2P lending platform started in London in2005. This market was virtually nonexistent in2007in China but has experienced significant growth since then. The number of platforms is increasing at a rate of400%every year. P2P lending is a new operating model of connecting Internet and microfinance, which is used to meet the needs of small loans from medium enterprises or groups of individuals. So it is an effective complement to the traditional financial system. And it provides a new way to invest. Obviously, the existence of online peer to peer lending is necessary and reasonable.Given the anonymous nature of online lending, P2P lending platforms play a great role in the online lending action. Therefore, asymmetric information will be alleviated effectively by establishing the trust mechanism for P2P online lending platforms, which is able to reduce the lenders’ investment risk and improve the efficiency of loans to borrowers. It has a great significance to reduce the obstacles to e-finance penetration due to mistrust to e-finance between network users by improving trust mechanism.The paper took qualitative and quantitative research methods. Firstly, we reviewed the relevant literature on the concept of trust, trust factors, trust building, etc., further integration of theories and models of previous studies, based on theory of reasoned action (TRA), theory of institution-based trust, theory of service recovery, from the perspective of online lending platform trust, with escrow, feedback, risk security, overdue mechanisms as influencing factors, with personal disposition to trust, risk appetite, return on investment, the platform’s reputation as control variables, we proposed institution-based trust impact model. We took44P2P online lending platforms on as object in our research, the term from June to November in2013, then we observed the trust level on P2P online lending platforms from network users and identified the key factors which influences users trust belief in online lending.The result of research shows that the overall trust level of P2P online lending platforms is low, mainly due to the lack of escrow, feedback and risk security mechanisms. Escrow, feedback, risk security, overdue mechanisms all have a significant positive impact on users’ trust on P2P online platforms. Among them, the effectiveness of escrow and feedback is strong, whereas the effectiveness of overdue mechanisms is weakest. Meanwhile, the influence of the platform’s reputation is higher than other four institutional factors.