Behavioral Factors and Propensity Towards Indebtedness of Peer-to-Peer Lending Users in West Java, Indonesia

The rapid growth of the digital economy drives other sectors of the economy, including the finance sector, through such innovations as peer-to-peer (P2P) lending. P2P lending increasingly popularizes loans and enhances the preference of individuals to borrow instead of saving, which manifests a pattern called a propensity toward indebtedness. This study aimed to examine the impact of feelings, materialism, risk perception, and financial literacy on individual borrowing behaviors. The other objective is to explore behavioral factors that influence the propensity toward indebtedness among P2P lending users in West Java. Data for this study were obtained from 400 P2P lending users in this region, determined by the sample size according to the Lemeshow formula. The data was collected through an online survey, and analysis was done using PLS-SEM to analyze the relationship between variables. The results showed that both emotions and financial literacy have significant negative effects on the propensity towards indebtedness, contrasted with materialism and risk perception that have a marked positive effect. These findings have shed light on the behavioral drivers of indebtedness, providing practical suggestions for how people can avoid falling into unwieldy debt. Furthermore, the outcome of the research may be beneficial to the government and firms operating P2P lending platforms in drafting appropriate strategies that assist in controlling and mitigating the associated societal risks.