Crowdfunding is another method for companies to raise capital from other individuals that support their investment needs. This method of funding is fairly new compared to the traditional forms of investing, and because of this, the need for regulation in Fintech is now starting to become a priority as innovation within the sector is growing more and more. Currently, there are emerging trends that are shaping the crowdfunding method as well as other sectors within the finance industry.
One major trend in crowdfunding, is the number of platforms that are starting to arise around Europe and the rest of the world. As stated previously, crowdfunding is a new method of funding that is growing with popularity. When a sector is proving to be profitable and successful, the appeal to jump on board surely increases. As the positive notoriety of crowdfunding continues, the demand for platforms grows as well. According to the 2015 UK Alternative Finance Industry Report, the number of live platforms in the EU jumped by 23% from 2014 to 2015. While this proves crowdfunding is a prospering sector, this can also negatively affect current or arising platforms. With the emergence of new platforms, it may be more difficult for all platforms to attract business to their own.
Larger companies are starting to get more involved with crowdfunding as they continue to see the benefits of it. Some companies have used crowdfunding to help develop small projects on their drawing board, which provides them with a major advantage. Companies are then given the opportunity to gauge the interest of the public by looking at the amount of funds raised and number of parties willing to invest in their project. This helps prevent wasting funds on projects that don’t have a high chance of surviving in the market. Although, at the same time there is some concern with this current trend as this could change the original purpose of crowdfunding.
Lastly, crowdfunding is starting to become the primary approach for funding compared to other traditional methods. It is extremely appealing for a new startup company with one of the reasons being the fact that it provides free marketing for their company or project. The projects can be placed onto different online platforms which then helps advertise their company and/or project to investors and the public. This funding style is also very attractive to investors as it is much simpler and has many benefits such as a low minimum investment requirement.
The rise of these new trends in crowdfunding is a positive sign for the sector as well as the Fintech industry. However, as these new trends come about, the need for regulation in the crowdfunding sector is becoming a huge priority for the EU commission. Presently there are already regulatory frameworks proposed by EU member states and the European Crowdfunding Network have already published protocols to follow.