Blockchain, herding and trust in peer-to-peer lending

Laura Gonzalez (Department of Finance, College of Business Administration, California State University, Long Beach, California, USA)

Managerial Finance

ISSN: 0307-4358

Publication date: 1 May 2019



The gradual implementation of blockchain technology in peer-to-peer (P2P) lending platforms facilitates safer, transparent and quick access to funds without having to deal with the more complex and costly processes of banks. Beyond that, the purpose of this paper is to examine trust-enhancing heuristics that show a need for blockchain to assist in monitoring and bad loan recovery.


This study examines 909 lending decisions by 303 finance students on a mock P2P site. Each participant was asked to make three lending decisions. The loan applications were identical with the exception of a female or male photo (vs an icon) and reports of having raised half the loan in either 2 or 11 days (vs 7).


Investors who have experienced financial trauma are more likely to herd and lend higher amounts to loan applicants that are highly trusted by other lenders. This effect is more pronounced for male investors lending to highly trusted female loan applicants.

Practical implications

Blockchain can compensate for behavioral biases and improve monitoring by helping track digital money transactions and assisting in bad loan recovery efforts.


This study is the first behavioral experiment to examine herding in P2P lending. The findings complement and corroborate those by Gonzalez and Komarova (2014, 2015) and emphasize the need for blockchain to assist beyond trusted records and safe transfers of funds.



Gonzalez, L. (2019), "Blockchain, herding and trust in peer-to-peer lending", Managerial Finance, Vol. ahead-of-print No. ahead-of-print.

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