Traditional banking and securities venues are now finding crowdfunding opportunities in Europe and the United States, according to Aite Group.
Boston, January 7, 2015– Crowdfunding, now considered an alternative asset class, is growing to co-exist with traditional banking and securities, and the industry as a whole is set to raise US$93 billion by 2025
.1 Through new ideas and human connections, crowdfunding offers real opportunities for accredited investors and institutions in 2015 while helping underserved borrower and entrepreneurial markets get funds, claims Aite Group in its report, Crowdfunding: Understanding the Basics.
In September and October 2014, Aite Group interviewed platform founders, product managers, and employees from financial crowdfunding platforms, as well as service providers supporting the industry, to explore key business trends and challenges, regulation, and anticipated evolution.
Aite Group’s focus for its research is financial crowdfunding in the United States and United Kingdom. In the United States, most platforms focus on accredited and institutional investors. The P2P platforms accepting investments from non-accredited investors offer fractional shares of promissory notes, which are created daily and held on their balance sheet. In the U.K., investments are essentially open to everyone.
The survey results show that, though crowdfunding will undoubtedly evolve over time, those who state it will implode in 2015 are unlikely to be correct. Platforms may stumble and retrench, but there are too many hands on the crowdfunding bucket for it to not right itself.
“Crowdfunding qualifies as a technology disruptor,” says Denise Valentine, senior analyst in Institutional Securities & Investments at Aite Group. “It will be seen as a leveler if it can provide previously unavailable opportunities to buyers and sellers. In any case, the wide beneficiary pool for platform members that fully understand its benefits and risks makes crowdfunding a pivotal financial services moment.”
Traditional banking and securities venues are also finding opportunities in crowdfunding. Increased interest from a greater number of banks, broker-dealers, securities exchanges, and those with pools of capital, such as asset owners and a wider group of investment firms, is just a matter of time.
In the near term, the crowdfunding industry will expand in product offerings and geography. Sites may focus on particular industry sectors or specific needs, for example mining projects, energy, or litigation finance. Business lending sites are now looking beyond startup and general loans to specialty funding, such as inventory or receivables funding.
The ingenuity of this new marketplace reflects the trying economic times and the evergreen pursuit of return on investment. New ideas such as crowdfunding have never had a better chance of succeeding, believes Aite Group.
1. October 2013, World Bank Report, “Crowdfunding’s Potential for the Developing World.”
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