Discussion paper

DP18622 Platform Lending and Innovation

We analyse the impact of platform lending on innovation and e-commerce vendors’ surplus. The platform generates revenues from both lending and marketplace fees, and can use lending to price discriminate vendors, thereby leading to higher marketplace fees and below-market interest rates. Prohibition of platforms lending may stifle innovation, not because of lack of platform funding, but because the high fee policy of the platform deters banks from financing innovators. Allowing platforms to lend may encourage innovation by providing access to subsidised credit, but it can also harm vendors who do not have financial needs. A sufficient condition for platform lending to be welfare-enhancing is that innovators would not receive funding from banks otherwise. However, if innovators would receive funding from banks, platform lending may reduce the overall vendor surplus. Cream skimming arises when the platform has better information than the bank about the prospects of the innovators’ projects. To address the potential negative effects of platform lending on vendors’ surplus, we also explore the impact of different regulatory instruments.


Gambacorta, L, L Madio and B Parigi (2023), ‘DP18622 Platform Lending and Innovation‘, CEPR Discussion Paper No. 18622. CEPR Press, Paris & London. https://cepr.org/publications/dp18622