Indonesian Peer to Peer Lending (P2P) at entrant’s disruptive trajectory
Abstract
Peer to peer (P2P) lending in Indonesia has been growing rapidly, therefore there is the potential for disruptive innovation processes in the financial sector. The aim of this study is to examine the impact of the growth of P2P lending on the growth of bank lending for micro, small and medium enterprises (MSME) and Non-MSME debtors. Separating the scale of the debtor is important, given the initial process of disruptive innovation of reaching areas that are not the incumbent’s main target. The examination was conducted in this study using panel data regression, whereby the examination was done in stages. This was an overall examination without differentiating between the regions, further examination conducted with more detail by separating between the loans inside and outside Java Island. This is because the economic structure in Indonesia is still dominated by the regions in Java, but FinTech is generally able to grow in areas with less developed local economies. The result of this study is consistent overall, Java and outside Java Island, as shows that the growth in P2P lending in Indonesia does not have a significant impact on the growth of bank loans for Non-MSME lending. However, it does have a negative impact on the growth of bank loans for MSME lending. This is in line with the entrant’s disruptive trajectory process by which the entrants enter the competition through an underserved market (niche markets) and not through the main target market of the incumbent (MSME).
Keyword : banking, disruptive innovation, FinTech, P2P lending, MSME, Non MSME
How to Cite
Kohardinata, C., Soewarno, N., & Tjahjadi, B. (2020). Indonesian Peer to Peer Lending (P2P) at entrant’s disruptive trajectory. Business: Theory and Practice, 21(1), 104-114. https://doi.org/10.3846/btp.2020.11171
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Anagnostopoulos, I. (2018). Fintech and regtech: impact on regulators and banks. Journal of Economics and Business, 100, 7–25. https://doi.org/10.1016/j.jeconbus.2018.07.003
Bank Indonesia. (2019). Statistik Sistem Keuangaan Indonesia.
Biyase, M., & Zwane, T. (2015). Economic growth and government expenditures in Africa: panel data analysis. Environmental Economics, 6(3), 15–19. https://businessperspectives.org/images/pdf/applications /publishing/ templates/article/assets/6792/ee_2015_03_Biyase.pdf
Christensen, C. M. (1997). Innovator’s dilemma. Boston, Massachusetts: Harvard Business School Press.
Christensen, C. M., Altman, E. J., Mcdonald, R., & Palmer, J. (2016). Disruptive Innovation: Intellectual History and Future Paths (No. 17–057). Harvard Business School.
Christensen, C. M., & Raynor, M. E. (2003). The innovator’s solution. Boston, Massachusetts: Harvard Business School Publishing Corporation.
Christensen, C. M., Raynor, M., & McDonald, R. (2015). What is disruptive innovation? Harvard Business Review, (December).
Coetzee, J. (2018). Strategic implications of Fintech on South African retail banks. South African Journal of Economic and Management Sciences, 21(1). https://doi.org/10.4102/sajems.v21i1.2455
Das, P., Verburg, R., Verbraeck, A., & Bonebakker, L. (2018). Barriers to innovation within large financial services firms An in-depth study into disruptive and radical innovation projects at a bank. European Journal of Innovation Management, 21(1), 96–112. https://doi.org/10.1108/EJIM-03-2017-0028
Das, S. (2017). Banking on disruption: digitization, FinTech and the future of retail banking. Clayton Christensen Institute and Tata Consultancy Services.
Doan, T., Nguyen, S., Vu, H., Tran, T., & Lim, S. (2015). Does rising import competition harm local firm productivity in less advanced economies? Evidence from the Vietnam’s manufacturing sector. The Journal of International Trade & Economic Development, (May), 37–41. https://doi.org/10.1080/09638199.2015.1035739
Gai, K., Qiu, M., & Sun, X. (2018). A survey on FinTech. Journal of Network and Computer Applications, 103, 262–273. https://doi.org/10.1016/j.jnca.2017.10.011
Govindarajan, V., & Kopalle, P. K. (2006). Disruptiveness of innovations: measurement and an assesment of reliability and validity. Strategic Management Journal, 27(July 2005), 189–199. https://doi.org/10.1002/smj.511
Gupta, A., & Xia, C. (2018). A Paradigm shift in banking: unfolding Asia’s FinTech adventures. In Banking and Finance Issues in Emerging Markets (pp. 215–254). Emerald Publishing Limited. https://doi.org/10.1108/S1571-038620180000025010
Hang, C. C., Chen, J., & Yu, D. (2011). An assessment framework for disruptive innovation. Foresight, 13(5), 4–13. https://doi.org/10.1108/14636681111170185
Iman, N. (2019). Traditional banks against fintech startups: a field investigation of a regional bank in Indonesia. Banks and Bank Systems, 14(3), 20–33. https://doi.org/10.21511/bbs.14(3).2019.03
Jagtiani, J., & Lemieux, C. (2018). Do fintech lenders penetrate areas that are underserved by traditional banks? Journal of Economics and Business, 100(March), 43–54. https://doi.org/10.1016/j.jeconbus.2018.03.001
Keuangan, O. J. (2019). Ikhtisar Data Keuangan Fintech (Peer To Peer Lending) Periode April 2019. Otoritas Jasa Keuangan.
King, A. A., & Baatartogtokh, B. (2015). How useful is the theory of disruptive innovation? H. MITSloan Management Review, 57(1).
Konsumen, Departemen Pengembangan UMKM dan Perlind-ungan. (2019). Laporan Perkembangan Kredit UMKM Triwulan IV 2018. https://www.bi.go.id/id/umkm/kredit/laporan/Pages/Laporan-Perkembangan-Kredit-UMKM-Triwulan-IV-2018.aspx
Kohnová, L., Papula, J., & Salajová, N. (2019). Internal factors supporting business and technological transformation in the context of industry 4.0. Business: Theory and Practice, 20, 137–145. https://doi.org/10.3846/btp.2019.13
Lavryk, A. (2016). P2P lending as an alternative to bank lending in Ukraine. Banks and Bank Systems, 11(4), 20–30. https://doi.org/10.21511/bbs.11(4).2016.02
Lee, I., & Shin, Y. J. (2018). Fintech: ecosystem, business models, investment decisions, and challenges. Business Horizons, 61(1), 35–46. https://doi.org/10.1016/j.bushor.2017.09.003
Li, Y., Spigt, R., & Swinkels, L. (2017). The impact of FinTech start-ups on incumbent retail banks’ share prices. Financial Innovation, 3(1). https://doi.org/10.1186/s40854-017-0076-7
Montgomery, N., Squires, G., & Syed, I. (2018). Disruptive potential of real estate crowdfunding in the real estate project finance industry A literature review. Property Management, 36(5), 597–619. https://doi.org/10.1108/PM-04-2018-0032
Nguyen, T. Le, Vu Van, H., Nguyen, L. D., & Tran, T. Q. (2017). Does rising import competition harm Vietnam’s local firm employment of the 2000s? Economic Research, 30(1), 1882–1895. https://doi.org/10.1080/1331677X.2017.1392883
Nuhiu, A., Hoti, A., & Bektashi, M. (2017). Determinants of commercial banks profitability through analysis of financial performance indicators: Evidence from Kosovo. Business: Theory and Practice, 18, 160–170. https://doi.org/10.3846/btp.2017.017
Organisation for economic co-operation and development. (2018). SME and Entrepreneurship Policy in Indonesia 2018.
Pillai, V. (2016). Panel data analysis with Stata (Part 1 fixed effects and random effects models) (No. 76869). https://mpra.ub.uni-muenchen.de/76869/
Ramlall, I. (2018). FinTech and the financial stability board. Understanding Financial Stability ((The Theory and Practice of Financial Stability), 1, 71-81. https://doi.org/10.1108/978-1-78756-833-420181016
Rasool, F., Koomsap, P., Afsar, B., & Panezai, B. A. (2018). A framework for disruptive innovation. Foresight, 20(3). https://doi.org/10.1108/FS-10-2017-0057
Romānova, I., & Kudinska, M. (2017). Banking and Fintech: a challenge or opportunity? Contemporary Issues in Finance: Current Challenges from Across Europe, 98, 21–35. https://doi.org/10.1108/S1569-375920160000098002
Ryu, H.-S. (2018). What makes users willing or hesitant to use Fintech?: the moderating effect of user type. Industrial Management and Data Systems, 118(3), 541–569. https://doi.org/10.1108/IMDS-07-2017-0325
Satell, G. (2017). Mapping innovation. McGraw-Hill Education.
Sloboda, L., Dunas, N., & Limański, A. (2018). Contemporary challenges and risks of retail banking development in Ukraine. Banks and Bank Systems, 13(1), 88–97. https://doi.org/10.21511/bbs.13(1).2018.09
Song, P., Chen, Y., Zhou, Z., & Wu, H. (2018). Performance analysis of peer-to-peer online lending platforms in China. Sustainability. https://doi.org/10.3390/su10092987
Statistik, B. P. (2019). Pertumbuhan Ekonomi Indonesia Triwulan IV-2018.
Stern, C., Makinen, M., & Qian, Z. (2017). FinTechs in China – with a special focus on peer to peer lending. Journal of Chinese Economic and Foreign Trade Studies, 10(3), 215–228. https://doi.org/10.1108/JCEFTS-06-2017-0015
Suhardianto, N., & Godigbe, B. G. (2018). Employee career constraint and innovation. SSRN Electronic Journal, 1–41. https://doi.org/10.2139/ssrn.2946851
Tan, Y. (2017). The impacts of competition and shadow banking on profitability: Evidence from the Chinese banking industry. North American Journal of Economics and Finance, 42, 89–106. https://doi.org/10.1016/j.najef.2017.07.007
Tjahjadi, B., Shanty, H. M., & Soewarno, N. (2019). Innovation, process capital and financial performance: mediating role of marketing performance (evidence from manufacturing industry in Indonesia). Humanities & Social Sciences Reviews, 7(1), 278–290. https://doi.org/10.18510/hssr.2019.7132
Tjahjadi, B., & Soewarno, N. (2018). Mediating roles of innovation capability and customer performance in seniority management – financial performance relationship: experience of SOEs in Indonesia. The 2018 International Conference of Organizational Innovation, 2018, 873–885. https://doi.org/10.18502/kss.v3i10.3432
Wu, M., & Hua, C. (2018). Effects of shadow banking on bank risks from the view of capital adequacy. International Review of Economics and Finance, 1–22. https://doi.org/10.1016/j.iref.2018.09.004
Zakky. (2018). 34 Nama Provinsi di Indonesia dan Ibukotanya Lengkap. https://www.zonareferensi.com/provinsi-di-indonesia/
Zalan, T., & Toufaily, E. (2017). The promise of fintech in emerging markets: Not as disruptive. Contemporary Economics, 11(4), 415–430. https://doi.org/10.5709/ce.1897-9254.253
Zhang, Z., Hu, W., & Chang, T. (2019). Nonlinear effects of P2P lending on bank loans in a Panel Smooth Transition Regression model. International Review of Economics and Finance, 59(August 2017), 468–473. https://doi.org/10.1016/j.iref.2018.10.010