Debt crowdfunding, also referred to as peer-to-peer (P2P) lending, represents an alternative source of loans for businesses to borrow money. P2P companies are different from banks in that they operate through online platforms, utilise data analytics and algorithms for credit risk assessment, and have much shorter turnaround times for loan approvals than the banks. While banks lend money to companies using customer deposits, P2P companies play the part of a matchmaker by enabling individual investors to put money directly towards funding a particular loan.

As many small and medium enterprises (SMEs) are unable to secure adequate loans from banks due to stringent pre-requisites, Kelvin Teo and Reynold Wijaya, founders of Funding Societies saw the potential as a P2P lender to fill this funding gap. Moreover, the sizeable number of SMEs in the economy lent the perception that there was enough demand for P2P services.

“Many SME owners don't have any business records and some don't have any bank accounts, so it's hard for them to access loans from banks. That's where we come in to offer the solution of fair interest loans with easy requirements,” says Wijaya, of the company’s value proposition.

However, the reality is that SME owners still turn to banks as the first port of call for their funding needs. Many SME owners are unaware of P2P lending as an alternative source of funding, and if among those who are aware, there is a certain conservatism and scepticism with which they view P2P lenders. The immense competition in the P2P landscape, proliferated by the worldwide trend of crowdfunding in FinTech innovations also added to the company’s challenges. While Funding Societies has had enviable growth in a short time span of just four years, having collected a number of accolades in FinTech along the way for its innovative service, it is crucial for the company to consider its marketing strategy going forward.

Jacquelyn Yang, Senior Marketing Manager of Funding Societies, is faced with organising the firm’s resources to improve the effectiveness of marketing efforts. What competitive advantage should Funding Societies build? What should the focus of its marketing communication objectives be? Should they compete directly with banks or should Funding Societies see themselves as playing a complementary role to banks? Which new or existing customer segments should Funding Societies focus more of its marketing efforts on? Should it target a particular SME segment? Understanding these factors would help Funding Societies build a marketing strategy to gain dominance over its competitors in the growing P2P lending landscape.

The case, written by Michelle P. Lee, SMU Associate Professor of Marketing (Education) and LKCSB Associate Dean (Undergraduate Programmes); Hannah H. Chang, SMU Associate Professor of Marketing and Director of LKCSB PhD Programmes; and Anirban Mukherjee, INSEAD Emerging Markets Visiting Fellow, provides insights on the burgeoning Fintech area and understanding of the P2P system.  It examines how to stand out in the trade for an innovative service, using market segmentation and market targeting to gain an edge in acquiring and retaining customers.

To read the case in full, please visit the CMP website by clicking here.