A default penalty model based on C2VP2C mode for internet financial platforms in Chinese market
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A default penalty model based on C2VP2C mode for internet financial platforms in Chinese market Sulin Pang1,2 · Huili Xian1,2 · Rongzhou Li3
© Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract The present study proposes a novel customer-to-virtual-product-to-customer (C2VP2C) mode of a loan default penalty model for Internet financial platforms (IFPs) in the Chinese market. The C2VP2C mode is developed based on the traditional peer-to-peer (P2P) business model and introduces IFP virtual products to risk control and loan matching. A loan default penalty model and a punishment mechanism of IFP borrowers in the C2VP2C mode have been developed. Firstly, the transaction mode and operational process of the C2VP2C mode of IFPs were established and three levels of loan matching space were constructed. The study established a penalty model for delinquent borrowers to assess their willingness to repay, and investigated the penalty intensity for defaults. The results show that a greater the penalty coefficient would result in more serious penalties, and with the delay of the repayment, the penalty coefficient showed less changes. The proposed method has important practical value and scientific significance for reducing the default rate of IFP borrowers and improving the loan repayment rate. Keywords C2VP2C mode · Internet financial platform · Loan default penalty model · Penalty coefficient · Willingness of repayment
1 Introduction As the financial policies in China grow more inclusive in these years, the scope of its financial services has expanded from services offered by traditional financial institutions like banks, trusts, securities firms, and insurance companies to emerging * Sulin Pang [email protected] 1
Institute of Finance Engineering at School of Management/School of Emergency Management, Jinan University, Guangzhou 510632, China
2
Guangdong Emergency Technology Research Center of Risk Evaluation and Prewarning ON Public Network Security, Guangzhou 510632, China
3
Macau Chinese Bank, Macao 999078, China
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S. Pang et al.
Internet petty loan, private placement fund and peer-to-peer (P2P) finance [1–3]. Especially, with wider adoption of Internet, big data, and artificial intelligence technologies in Internet finance, more and more new financial activities come into being. Statistical reports by China’s central bank revealed that in the first half of 2019, the Chinese Yuan (CNY) loan balance amounted to 145.97 trillion CNY with a year-onyear growth rate of 13%, and the social financing scale reached 21.326 trillion CNY with a year-on-year growth rate of 10.9%. The existing banking system in China has rational mobility, moderate growth of currency credit and social financing scale, and a stable market interest rate. Because of the moderate growth of the social financing scale, more and more institutions and individual investors are investing in the loan business. As the social financing channels broaden and the financing scale increases, individual b
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