CROWDFUNDING, FINTECH CONTRIBUTION FOR CONSUMERS

The fintech bring new paradigms that drive disruption in both services and in the processes of agent interaction

It is commonly mentioned that fintech brings with it not only new technologies but new paradigms, that drive disruption both in the services and financial products themselves (credits, savings, payments, and insurance) and in the processes or methodologies of agent interaction… And it is true. A clear example of this is collective financing or crowdfunding. Although there are multiple forms and methodologies of crowdfunding around the world, broadly speaking, we can distinguish three approaches or models that will allow us to highlight the novelty of this initiative for consumer agents.

A first model, closer to traditional finance, is Equity-based. This methodology compares more to the public offerings of traditional companies because, basically, the one that contributes to a certain project obtains a financial participation as a percentage of sales or dividends. The novelty in these cases is, then, mainly technological and not so much methodological.

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However, one of the most traditional, widespread and disruptive models of crowdfunding was based on rewards (Reward-based). In these cases, when funding a project it becomes part of it, but not (necessarily) in financial terms. This non-financial participation takes different forms but seeks to attract the investor as a consumer. This is, for example, the promise of having an advanced and unpublished version of the product at anchor, participating in the design of the product name or in some detail of its final version, among other examples.

Kickstarter, one of the most recognized crowdfunding platforms, was developed mainly to promote the creation of creative projects (art, music, movies, or creative products) under this logic. The sponsored projects offer rewards such as consumer experiences, being the extra of a film anchored by the platform, getting to know its protagonists, attending the event premiere. To date, this platform created in 2009 that attracts the investor in its role as the consumer has funded more than 250,000 projects through contributions of more than 9 million individuals who mobilized a flow of more than $ 1,900 million.

Another interesting case is that of Indiegogo. Founded in 2008 to promote creative projects, the main difference was that it allowed partial funding. That is, if the project did not reach the total amount proposed on the web, it is allowed to transfer the money collected to start it and continue the collection in conjunction with its execution. It is thus more flexible than Kickstarter, in which if the total amount is not reached the entrepreneur does not receive money to carry out his project.

Finally, a third approach widely spread in crowdfunding is one that is motivated by social impact. While there is no financial or direct consumption reward for the agent that contributes to the project, the desire to have some impact on the community or to see the idea materialized becomes the main driving force of the investor.

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Neighborly, a site that started in 2012 for purely social purposes, initially funded projects solely for civic purposes. Although they moved to finance microloans and small municipal bonds, Neighborly allowed neighbors to invest, for example, in bonds to build parks or public spaces, getting a financial return in return. After two years, the initiative had funded 55 community projects for a total of $ 2.5 million.

As can be seen, the most interesting and innovative aspect of these crowdfunding initiatives was not only the ease of connecting thousands of distant agents through technology. In the models introduced by this particular type of fintech oriented to collective financing, the possibility arises that the return is not financial but the desire to consume the product or see the project that is being funded. That characteristic of the investor-consumer is something still unusual for the traditional financial markets.