Pricing in the online invoice trading market: First empirical evidence

- We study the pricing in the online invoice trading market.
- The interest rate, the duration and the advance rate are determinants of the default probability in invoice trading.
- The pricing is different under an auction mechanism as compared to a fixed-price regime.
- The default, interest and advance rates are on average higher within the auction period.

In recent years, online invoice trading has gained importance in providing SMEs with short-term financing. In this paper, we present first empirical evidence concerning the question whether the risk of payment difficulties is appropriately reflected in the pricing variables. To this end, we investigate predictors of default of online invoice trading platforms. We analyze both the probability of default and the loss rate and find that the interest rate, the duration and the percentage funded have good predictive power. Furthermore, we show that the pricing mechanism (auction vs. fixed prices) helps to explain defaults on online invoice trading platforms.