After roughly thirteen years, the modern crowdfunding industry is now deeply entrenched as a vital part of the global economic system. The World Bank estimates that the industry will reach a $90 billion valuation by 2020, which is not unlikely considering the Crowdfunding market’s current $34billion valuation. Massive growth is an everyday occurrence in the crowdfunding sector: a recent report by the University of Cambridge Judge Business School shows that the alternative finance market in the Americas went up 213% from 2014 to 2015.
Everything from financial lending to real estate has been impacted by crowdfunding, with real estate especially experiencing interest from a generation of new investors, ones that would have been unable to access the property market without crowdfunding – stocks and bonds have always been relatively accessible, but real estate has (until now) been restricted to high-net-worth individuals.
It seems there are no limits to crowdfunding and its potential to revolutionise the economic system. But to progress further, the industry must continue to change and evolve. Let’s take a look at some of the ways crowdfunding will develop in the coming years:
In recent years, America has dominated the crowdfunding sector. But this may not remain the case. Nations such as India and Brazil have been experiencing better economic growth than developed nations like the US, and this new prosperity may well feed into their respective crowdfunding sectors. Malaysia, for example, was the first country in the Asia Pacific Region to legislate equity crowdfunding activities with their Capital Markets and Services Bill in 2015 – a sobering thought considering that America’s legislation concerning equity crowdfunding only came into effect in March of this year.
Now that the more general reward-based, equity-based, and lending-based platforms are well-established, people will start to look for more focused crowdfunding platforms to fit their specific needs. Legal crowdfunding, for example, has recently developed, allowing people to crowdfund legal fees – junior British doctors’ continuing legal battle with the UK government, for instance, is one that is now open to crowdfunding. Another example comes from real estate: current Real Estate Crowdfunding platforms tend to split themselves into commercial vs. residential, but we may soon see platforms develop that specialize even further, focusing on more specific property types such as holiday lets.
Crowdfunding’s legacy is built upon the democratisation of finance, i.e. the giving of monetary power to the people. But now that crowdfunding is so widely used, large corporations will more than likely seek to benefit from the popularity of the practice. Santander, for instance, have already teamed up with crowdfunding sites to offer their customers alternative peer-to-peer lending options.
Most crowdfunding nations are starting to see the benefit that the industry has to offer the overall economy, and as such they are putting established structures in place for alternative finance to operate within – think of the JOBS Act in America, or the Malaysian Capital Markets and Services Bill mentioned above. A structuring of regulations will provide more freedom for crowdfunding to develop as a practice, opening up more avenues and potentially increasing the chances of an economic revolution centred on financial democracy.
In order to fulfil the massive growth predictions surrounding crowdfunding, the industry will have to continue to develop the technology involved. In the coming years we are likely to see crowdfunding tech getting more streamlined and more efficient, possibly reducing the entire process to a single click on a smartphone screen. The way platforms operate on an internal level will also have to evolve – this, in fact, is already happening with platforms figuring out ways to target specific people and get their funding projects in front of those who are most likely to donate or invest.
October 19, 2016
Compound growth: the key to a powerful portfolio
Market downturns caused by a combination of the coronavirus pandemic, rising inflation, and the sky-high cost of living – amplified by Russia’s invasion of Ukraine – mean that all signs …
Real estate investing – how to profit from inflation
Inflation is rising around the world. Driven by globalization, low-interest rates and technological advances, households have enjoyed years of accommodating financial conditions. But driven by pandemic-era economic stimulus and geopolitical …
What is fintech?
Financial technology, more commonly known as fintech, is revolutionizing the world of financial services (FS). But what exactly is it? We’ve put together a quick need-to-know guide on all things …