Managing Innovation : The Funding Circle

Running head: MANAGING INNOVATION
Managing Innovation
(Funding Circle)
Name of the student:
Name of the university:
Author Note

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Executive summary
The Funding Circle is the marketplace over the Internet. This enables investors to provide the money
directly to various small business. Here, the business are able to borrow till one million pounds at
United Kingdom till 500,000 dollars at US and till 250,000 pounds at Netherlands and Germany till
60 months. From the very first, the rate of loan is been with auction measures and from 2015’s
September, the Funding Circle has been determining loan rate with the offers in the basis of loan
term and risk category. To understand the scenario of the business, the peer-to-peer online lending
innovation is considered. Its historical development of service and products are investigated in this
report. Further, the study proposes various probable future development directions for the service.

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Table of Contents
Introduction:..........................................................................................................................................3
P2P Innovation Theory:.........................................................................................................................3
Definitions, Principals and Processes of the theory:.........................................................................3
Evaluation of the theory:...................................................................................................................5
Application of P2P Innovation Theory within the historical development context:.............................7
Company background:.......................................................................................................................7
Discussion on the Finding Circle’s business model:.....................................................................7
Application of P-2-P innovation online for the current development context of Funding Circle: 9
Evaluation of historical development:...............................................................................................9
Application of the Peer-to-Peer Innovation Theory in the future development context:....................10
Conclusion:..........................................................................................................................................11
References:..........................................................................................................................................13
Appendix:............................................................................................................................................16

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Introduction:
The Online P2P or Peer to Peer lending is a latest and vital financial measures for various
micro and small level enterprises. This is been conducted over the Internet and then excludes the
inclusion of financial and collateral institutions. For managing the inherent challenges of the latest
financing process, the cultivation of trust is essential. It is also referred to as the social lending. This
let people to borrow and lend the money in direct way from others. This also boosts the returns of
individuals supplying capitals and then decreases the rate of interests for the one using that.
Nonetheless, it is also seen to be demanding much more time and has been entailing much more
risks. For this persuasion tactics and trust building is required on Online environments. This is done
through considering the way uncertainty reduction theory along with the elaboration likelihood
model could be implemented to online environments of high-stakes of P2P lending. As per the
uncertainty theory, the exchange and collection of information on others reduces the uncertainty an
permits the prediction of other’s behaviors and attitudes.
P2P Innovation Theory:
Definitions, Principals and Processes of the theory:
The internet has been providing people with broader audiences of the potential interaction
partners. The communications made over the Internet permit human beings to make interactions with
other people who are never been copresent geographically. Few people are been entering the world
of Internet with largely suspicious strangers and interacting mainly with those they have known
within face-to-face world. Other people has been much trusting and misjudging changes to make
interact with strangers and turning the victims of the malicious computer viruses or identity fraud
(Wei and Lin 2017). Since the trust is vital for the interactions to made for high stakes, there are

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complexities to implement trust over the Internet limiting the ability to use the medium to seek other
people intending to make function with the minimum partnership. Hence, it is crucial to find how the
people has been facilitating the trust over the Internet such that the Online interactions could be
much more advantageous (Freedman and Jin 2017). For the present study, the P2P lending
interactions are evaluated. Inclusion of P2P of non-financial loan requests and dependency is on
people to go got whom they must be funding and providing the natural setting to test the effect of
language usage to create the trusting relationship to grant the loan request. This is seen as the trust
indicator.
In this Peer-to-Peer Online banking process, the borrowers directly appeal to pool of people
lenders utilizing the request including textual narratives for justifying the loans. Commonly in this
transaction, the people intending borrow money or simply the borrowers and the one who like to
lend money have no prior relationship. Apart from that, mainly most of the interactions between the
borrower and lenders happen with the interface of the website where the borrower is able to submit
the loan request and the lender go for the fund requesting and not (Dorfleitner et al. 2016). Further,
beyond that the loan insurance and subsequent repayment can happen and the lender and borrower is
unlikely to have further interactions. The P2P sites has been acting as the conduct to facilitate the
bidding and requesting measure and coordination of process of payment as the load is been made.
Nonetheless, the P2P websites unlike the conventional banks are never funding loans. They are the
individual lenders providing capitals and carrying default challenges. In this way the P2P lending
interactions are done over the Internet and the one-time interactions where the stakes are seen to be
high for those two parties. Here, variables within decision making process are defined exclusively
through the profile and request of the borrower. At those high risk contexts, the lenders are involved
highly and motivate in details for processing loans and descriptions of additional data present about
borrower as the funding decisions are made (Xia, Liu and Liu 2017). Apart from that borrowers who

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are seeking for the loans with the Prosper generate loan request that involves the conventional finical
data like credit grade and the DTI or debt-to-income ratio. The financial data is directly pulled from
the credit report of the borrower and this verified for the accuracy. This request involves the non-
finial data like loan description, loan title and picture. Further, borrowers are able to write must or
little as they require in their description of loan for persuading lenders of vital necessities for loan
and the way they repay that. Besides, the lenders are able to read requests and the choose borrowers
for funding and the extent funding can be offered for the borrowers.
Evaluation of the theory:
There are various prior researchers that have explored the effects of personal characteristics
that could be seen through the image included in profiles like the race of borrower or physical
attractiveness. Nonetheless, the verbal elements like the usage of language in the loan requests are
under researched. There are previous studies including the primary information regarding the
readability of loan description as the control variables (Milne and Parboteeah 2016). However, the
research has never looked to the depth of the language usage in P2P lending and the way how
specific linguistic features are able to impact the funding success. Besides, the borrower’s language
is utilized for communicating the request to be utilized by the lenders for making the decisions of
funding. Usage of terms are commonly considered to be meaningful market of social and cognitive
process and way people can express to be more persuasive or be informative than the content of
what they are said.
One of the important benefits of this to study trust on the online scenario is that perceived
trustworthiness of borrower can be quantifiable easily on the basis of whether lenders intend to loan
money to borrower. Trust is the view-point of extent to what the exchange parents is able to fulfill
transactional obligations in the cases that are been characterized through uncertainty or risks

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(Dorfleitner, Oswald and Zhang 2019). Since, the transaction promise present between the couple of
loans are nearly same type to the lenders the cause the lender can choose to fund the loan on other is
been presumably perceived the trustworthiness of borrower and belief that borrower can fulfil the
obligations of repayment. The success of funding must be reflecting directly to the trustworthiness
perceived of the request of loan.
Important advantages of P2P lending for the people are that lenders are able to enjoy the
returns of various percentage points above for the bank. The borrowers are able to enjoy same type
of cost advantages as compared to the rates at credit union or banks. There are many people who like
the knowing who are they lending the money to and the reason why they require that money. This
provides them with the concept of personal level satisfaction and could also choose the borrowers
who they trust to repay the loan on and full time (Ge et al. 2017). Besides, there are charitable
aspects of lending as the potential borrowers has the financial history and sympathetic tale to be told.
Here, the lender could willingly choose to forgo the greater return and then assume there is higher
risk for funding that loans. True sense of the community can be present at P2P lender sites. The
forums are tending to be active and users eagerly exchange the data of lending and borrowing
experiences. The suggested changes in P2P policies are debated vigorously. Few hate banks and
would perform anything for avoiding their usage (Davis and Murphy 2016).
It is also natural that this must also have its own downside. Firstly, various borrowers are
been excluded here since they never have the good credit. The lenders have been facing the exposure
from the defaults and the funds that also have few exceptions that are never insured. Secondly, the
success of the P2P lenders are also limited and the loan varies as per lenders and time. Lenders could
be talked to making poor loan having effective sob tale. Thirdly, as compared to walking to bank and
credit union, the P2P lending would be taking much more amount of work particularly as the loans

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are funded with auction. This selection and process of bidding is demanding the level of financial
sophistication that people never had (Caldieraro et al. 2018). Though the returns to the lenders are
greater than the one on the certificates of deposits in due time that is never certain that is greater than
those that on the index fund publicly traded needs relatively less task to buy and then hold. It is not
that everybody needs their financial story to get published over Online and those that require any
sense of some personal privacy that the great impersonal banks has the advantages (Balyuk 2019).
Since, that is a one industry, they are been found to be various waves of the interface of
administrative challenges, lender consolidation and modifications in the practices of the lending. It is
more a burden and challenge than the disciplined type if investors are intending to allow. However,
it must be reminded that despite the drawbacks, the P2 lending is been getting traction and seeming
to be certain to turn to be more popular.
Application of P2P Innovation Theory within the historical development context:
Company background:
The Funding Circle is a peer-to-peer type lending marketplace. This permits the publics to
lend the money to small and mid-sized organizations directly. With the exchange the business can
access the less costs of the financing that they can get at ban and public is able to turn to be lenders
and in doing that make the return on the return on capital (Funding Circle: Business Growth
Funding, 2020).
Discussion on the Finding Circle’s business model:
Customer segments:

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They have the multisided model having the couple of interdependent segments of customers
both required for operations. Firstly, there are the borrowers that comprise of the different small
businesses. These could be implemented for unsecured and secured loans for enlarging the firms and
gain working capitals and buy resources, create the property and gain commercial mortgages and
cover the one-off business expenses. Then, there are the investors that consist of broad range of
entities that involves the government agencies, universities and corporations. (Funding Circle is
planning layoffs outside the UK amid increased losses, 2020)
Value proposition:
The company has been providing the four main value propositions. They are brand status,
performance, convenience and accessibility. Funding Circle has been providing small business with
the access towards the capitals that are difficult to be obtained and enabling to borrow till 1 million
pounds for a time of 5 years. Funding Circle makes the application for the loan to be as easy as
possible. This process over the Internet takes ten minutes and the candidates get the discussion with
within 24 hours typically (Chan, Lu and Wei 2019). They touts strong level of performance and
claiming that the investors are able to earn the estimated return of 7.3% every year. They have strong
reputation and as one of leading successful financial technology business at UK and billing as the
nation’s biggest marketplace. The investors are seen to be funding 15,000 loans at the Netherlands,
German, Spain, U.S. and UK. They are been supported by British Business Bank investing 40
million pounds cross the “British Business Bank Investment Program”. Ultimately, as per a survey
during 2013 there were 77% of the customers of Funding Circle revealed that they could likely or
very likely to come to that for the loan prior approaching the bank (Chen, Zhou and Wan 2016).
Channels:

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Their basic channel is the website that helps the marketing of their service. They also engage
in advertising on TV and conducting the roadshows on what they travel and are meeting brokers or
discussing the way they could be active together for generating more number of clients.

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Application of P-2-P innovation online for the current development context of Funding Circle:
Customer Relationships:
Their customer relationship is mainly self-service and of automated nature. The customers
uses services with the sites having restricted interaction with the staffs. The investors are able to
utilize Autobid features permitting to invest in the qualified agencies in automatic manner. Further,
detailed Resource Center is there on the various videos, reports, articles on the site offerings on
lending. There are also some components of personal assistance as Funding Circle delivers email
and phone support (Jiang et al. 2018).
Evaluation of historical development:
Having the fast application, the dedicated account managers and quick decision one must
remain concentrated in the business at the same time concentrate on the loan. Considering the
business to further level is never been simple. It is seen that 57,000 business of United Kingdom has
financed the aims to borrow the 6.2 billion pounds through the company. The loans are been funded
through the community of numerous investors that involves the 90,000 individuals, local level
government and additional institutions looking to lend to the business of Britain like Funding Circle.
They have been handling all the things for every elements and also collecting the finance required
that one know to have great community of investors behind Funding Circle. They are trusted by
various investors and business. They just perform business lending and tailors the award winning
service to provide the best possible experiences (Tao, Dong and Lin 2017).

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Application of the Peer-to-Peer Innovation Theory in the future development
context:
As one should be undoubtedly have the concept regarding what the lending can notify, the
peer to peer lending is deal done between a couple of parties interested. They are the borrowers and
investors. The borrowers in intended to register on the P-2P lending application where verifying that
is credentialing and a loan request s to be put reals all the details why the investor must be
considering him. On the other hand, the investors has been scrolling down every loan listed and
halting by the one pleasing them the maximum. As the amount of loan varies from every person
along with as per the cause behind searching the loan. The future of Funding Circle is totally the
mirror view as one see. This acts in favor as for others that can be turning the cards unexpectedly.
Besides, the flipping is never the new in that domain of Funding Circle o P-2-P lending. As the
borrower is on the side of winners, the investors could be suffering loss that is owing to denial of
payment by corresponding buyer. It would be wrong to be guessing at that stage. Here, Funding
Circle is innovating and similar to plethora of scopes for every start-ups for venting the P-2-P
lending startups (Gao et al. 2018). Besides, there are various odds that has been favoring Funding
Circles innovation. They are discussed hereafter. As the further prospects of P-2P lending has been
multifaceted, there are numerous advantages pleasing the enthusiasts of business for trying their
plans and laying game of borrowing and lending. Moreover, there are greater returns. For prolonged
times, maximum of the people have been looking up to the platforms that Funding Circle platform
for giving loans (Xu and Chau 2018).
Nonetheless, the interest rates and undeniably great. As the P2P lending is considered, the
investor and borrowers can drive the advantages. At one side, the borrower needs to pay interest rate
at less amount and the investors can change more than they are been paid from the investment of

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banks. Further, there is narrowing of the application process. The banks have their individual
policies and standards that give loans. This has various paper work and frequent number of visits for
the banks prior they are granted to the loan amount. P2P lending portals has been streamlining the
overall method with the e-application. Here, the borrower requires to do that for setting up he profile
and then request the loan with notifying rate of interest at what he intends to make the amount
repaid. Again, the borrowers must be exploring list for connecting the people that has been
appearing to be feasible. Then, the borrowers should be exploring lists for connecting with the
people that has been appearing feasible. Again, there are quicker process related to funding. Further,
there are quicker funding process (Feller, Gleasure and Treacy 2017). Moreover, the banks has been
taking about the week’s prior they can agree to sanction the amount of loans. The lending apps on
the contrary has been automating that process and providing access for funding in a week. Apart
from that, the users are able to request the quantity as least as ten pounds that can lead to higher
traffic. Here, high level of participation is seen on that app. Prospects of Fintech Innovation has been
predominantly great and is never due to the rise in industry size. This is due to the fact that they
about every sectors that have effect of Fintech Innovation. This has changed the area of Financial
Services and must contribute to disruption of the economic world. Through considering the present
trends of market, that is never wrong to reveal that peer-to-peer lending is been revolutionizing the
total industrial sector. Again, the lending is to be revolutionizing the total sector. For adding to that,
this has opened the door for every start-up enthusiast for venting the apps of P2P lending for
kickstarting business (Cai et al. 2016).
Conclusion:
The peer learning is latest method to look how the knowledge gets shared and then
transferred between human beings. This is specifically important for huge business having interest in

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share the expertise actively to stakeholders and staffs. The “peer-to-peer innovation” is the
viewpoints to be considered as the comprehensive innovation practice is to be considered. Here, the
concept of viewpoint is that while dealing with complicated cases the issues that one look for can
come to oneself as one have seen the prior perspective. This type of perspective is the method of
looking at the issue illuminating that in the utmost useful manner. At present in the rising phase, the
peer-to-peer lending as been exposing the overall entire set of opportunities of investments for every
stakeholders. The lending of P2P has been trending and next-generation investors must be changing
from conventional ways of business towards explicable P2P lending apps to provide the loans. There
is no doubt that cutting of banks and inducing latest platforms has been voicing the innovations.
However, the study demonstrates the way how this innovation can turn up in the near future world
that is worth exciting.

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References:
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determinants in interest-free peer-to-peer lending. Journal of Business Ethics, pp.1-26.

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Dorfleitner, G., Priberny, C., Schuster, S., Stoiber, J., Weber, M., de Castro, I. and Kammler, J.,
2016. Description-text related soft information in peer-to-peer lending–Evidence from two leading
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Appendix:
Figure 1: “Peer-to-Peer Lending”
(Source: Wolfe and Yoo 2018, p. 24)

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Figure 2: “Peer to Peer Lending - The Investor's View”
(Source: Tan et al. 2018, p. 1570)

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Figure 3: “The economics of peer-to-peer lending”
(Source: Havrylchyk et al. 2017, p.16)