Concept of Peer-to-Peer Lending and Application of Machine Learning in Credit Scoring
Concept of Peer-to-Peer Lending and Application of Machine Learning in Credit Scoring

Summary/Abstract: Numerous applications of AI are found in the banking sector. Starting from the front-office,enhancing customer recognition and personalized services, continuing in the middle-officewith automated fraud-detection systems, ending with the back-office and internal processesautomatization. In this paper we provide comprehensive information on the phenomenon ofpeer-to-peer lending in the modern view of alternative finance and crowdfunding from severalperspectives. The aim of this research is to explore the phenomenon of peer-to-peer lendingmarket model. We apply and check the suitability and effectiveness of credit scorecards in themarketplace lending along with determining the appropriate cut-off point.We conducted this research by exploring recent studies and open-source data on marketplacelending. The scorecard development is based on the P2P loans open dataset that containsrepayments record along with both hard and soft features of each loan. The quantitative partconsists in applying a machine learning algorithm in building a credit scorecard, namely logisticregression.

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