The Determinants of Profitability in the Fintech Peer-to-Peer Lending: The Role of Liquidity, Efficiency, Interest Rates, and Inflation

Abstract

This study aims to analyze the influence of liquidity measured by the cash ratio, operational efficiency represented by the operating expense ratio, the policy interest rate, and inflation on the profitability of peer-to-peer lending fintech companies registered with the Financial Services Authority during the study period. The population includes all registered and supervised peer-to-peer lending platforms, while the sample was selected based on predetermined criteria. The research employs a quantitative approach using panel data regression analysis processed with statistical software. The results indicate that, individually, the cash ratio and the policy interest rate do not have a significant effect on profitability, as measured by return on assets. In contrast, operational efficiency (Operating Expenses Ratio) and inflation show a negative and significant influence on profitability within the peer-to-peer lending industry. Simultaneously, all independent variables examined in this study demonstrate a significant effect on overall profitability. These findings highlight that internal operational performance and certain macroeconomic conditions, particularly inflation, play an essential role in shaping the profitability of peer-to-peer lending fintech companies in Indonesia. Therefore, firms are encouraged to enhance their operational efficiency while also considering broader economic dynamics when formulating strategic decisions.