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Tuesday, February 21, 2017

Is Crowdfunding Making Banks Obsolete?

If your dreams do not scare you, they are not big enough. Well, they better be big enough, as it has never been a more convenient time to dream big than right now. With the very impressive crowdfunding initiative taking over major parts of the world, most humans could only dream of having such a good opportunity to reach their craziest dream – a creative mind is all you need!

While it is more than welcoming for most people throughout the globe, it is definitely not very good news for banks and other financial institutions. Despite the existence of similar types of collecting funds long before, Crowdfunding was reportedly first used in 2003, the launch of ArtistShare as an online crowdfunding platform. Soon after, more crowdfunding sites such as ChipIn, IndieGoGo, Kickstarter, and GoFundMe followed – consequently, the funds raised by these sites heavily increased from $89m in 2010 to $1.47b in 2011, $2.66b in 2012, and over $5.1b in 2013. Banks have been closely keeping an eye on the new initiative and taking note as a precaution for the decrease in loans Crowdfunding is expected to cause.

Crowdfunding scheme

As far as banks are concerned, Crowdfunding could actually pose a serious threat, albeit in specific countries only for now. The incredible rise of its popularity in countries like United States, Great Britain, and Australia will definitely be affecting the demand for loans, especially individual and SME loans – although not to an alarming point just yet, as crowdfunding is still used by artists and creative people for new products for the most part, hence the majority of businesses will not be entering the Crowdfunding world. On the other hand, the demand for individual and SME loans in Singapore is expected to only continue growing, as initiatives such as Crowdfunding haven’t gained the required trust of most Asian countries just yet, especially Singapore. Sites such as Togather.asia and Crowdonomic have not reached anywhere near the success they had hoped – however, Crowdtivate was specially launched for Singapore this year and is expected to at least contribute to a gradual change of mentality.

Crowdfunding has gained its popularity because of its impressive benefits it offers to the population; especially individuals, startups, and small companies in dire need of funding. Through Crowdfunding, people can give their contribution, as little as they can, to support new companies in making creative and useful products, or art people in creating enjoyable art products – as an example, I would be very interested to support a company that makes environmentally friendly furniture, in fact I’d love it! As is the case with many individuals and small companies, bank loans are difficult to get and, therefore, innovative ideas might go to a waste due to a lack of funding.

The popularity of Crowdfunding has especially boomed due to its benefits to individuals. To start with, new products –which might have never appeared without the support from Crowdfunding – ensure an increase in consumer choice; secondly, people are able to own what they love through gaining securities for their contribution; thirdly, innovative creators are able to create many more products, services, movies, music among many other products thanks to the extra funding; and finally, the world will consequently be a better place.

Ultimately, the recent rapid increase in popularity is only the beginning and the total funds raised through Crowdfunding is bound to continue increasing to unimaginable margins – in fact, a 2013 World Bank report expects Crowdfunding to reach $50b by 2025 – banks beware! Either way, Crowdfunding is sure to make world a much better place for all of us, both in giving and receiving.

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