Equity crowdfunding has ushered in a move towards the democratization of the global investment market. Investment in high quality, secure equity investing is now available to almost everyone, where before it was restricted to financial professionals and high-net-worth individuals that had the capital to invest.
This is the first major impact on the global investment market: the widening of scope. With equity crowdfunding, the opportunity to invest and gain returns is now open to anyone with access to a computer, meaning that investment for equity may become a far more common way for people to utilise any savings or excess capital. This will help take the market out of the hands of the usual institutional investors, thus stopping investment from being a strictly insiders’ game.
The dissemination of information is the internet’s bread and butter – it is, after all, often referred to as the “information revolution”. This will have a direct affect on investment, an industry where relevant information used to be scarce. Equity crowdfunding platforms now provide far more information to investors than ever, with even more info on market trends and global changes available elsewhere online. This means that the average investors will be more clued-up than they’ve ever been, thus reducing the potential for fraud and exploitation.
With more people investing, more will be demanded of the platforms that facilitate investment. This brings us onto our next point: scrutiny. More people involved in the market means more people to answer to for the companies/institutions that operate within the market. The internet is not known for its tolerance, and companies will now have to account for a much larger and more aggressive backlash in response to any untoward dealings.
But it is not only the general public that companies will have to answer to: financial authorities will become more vigilant as well. Newer methods of practice are always put under the microscope during their infancy, and for the investment market this will take the form of strict rules regarding best practice in dealing with the new wave of non-accredited investors, which will in turn make for a safer environment for all. The restrictions included in the recent US JOBS act (as well as the introduction of the act itself) are a good example of this.
With any change facilitated by technology, efficiency is also markedly improved. The ease of online equity crowdfunding means that the investment process is now quicker and simpler than ever before, having previously been an industry notorious for its paperwork and time consuming processes. Remote access via the internet also means that investment can be undertaken from anywhere in the world, regardless of location or distance from the investment target. Technology always forces traditional industries to adapt, and the financial world is no different: in response to the quick-time nature of the internet, regulatory processes will be forced to become faster and more efficient to correlate with the technology surrounding them.
Equity crowdfunding may be new, but its growth in popularity has been astronomic – in the UK, for example, more than 175 million pounds has been raised by 2000 equity crowdfunding companies over the past four years. In Switzerland the crowdfunding market as a whole is predicted to double in size over the course of 2016, according to The Institute of Financial Services Zug IFZ. As popularity increases, the affects equity crowdfunding will have on the investment market will be intensified and multiplied.
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by Bricksave CEO, Tom de Lucy
July 04, 2016
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