Introduction
With the growth of Fintech systems rapidly changing day by day, crowdfunding has become increasingly popular. With all the FinTech companies and start-ups having various ways of promoting financial inclusion like mytalu, many also have a lot of crowdfunding options available to help consumers manage their finances. In this week’s blog post we look into the nature of crowdfunding and whether or not it has had such a big social impact.
Digital Communities
Essentially crowdfunding enables people to put their money together and achieve their fundraising goals and FinTech apps provide the best platform to do that. Through this, it encourages people to create digital communities, enhancing their skill sets and aids people to gain access to network and partnership opportunities through the collaborative nature of it. Ultimately it gives people a sense of empowerment over their fiances and networks.
Types of Crowdfunding
There are four main types of crowdfunding and these include:
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Equity-based
This type of crowdfunding enables people to reach a higher capital in terms of their investments however there is also a concern of possible percentage dilution.
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Reward-based
This is mostly used for funding new projects as it allows people to keep ownership of their company however if the funding doesn’t meet its needed target, one won’t be able to reap the benefits.
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Debt-based
This method provides a much more efficient way in terms of getting a loan through crowdfunding but also requires all of the funding to be paid back.
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Donation-based
Although this allows people to not have to worry about any repayments, the funding is never quite guaranteed.
These options give small businesses or start-ups the tools to choose which kind of crowdfunding would suit their company best as despite them having differing pros and cons they all offer the benefits of increased publicity, as well as more access to capital and market validation.
How its helped communities
It is no doubt that crowdfunding has been a huge help to society at a global scale, especially within communities. With the resources that crowdfunding provides it massively aids community projects; whether it’s for running more activities, programmes, schemes or businesses. This can also be seen through the fact that crowdfunding ensures quite a minimal risk for investors, making it an easier route for people to take when starting a small business or community project. Additionally, even London City Hall states that “77% of those involved feel more empowered as a result of crowdfunding for their project” and that “65% of projects funded things that could not be funded elsewhere” – further reiterating the impact of it.
Possible future impact
From looking into the concept of crowdfunding and what it entails, it is evident that society has hugely benefited from it, especially when it comes to instances like building digital communities and helping local communities worldwide. Despite the fact that some crowdfunding options have some setbacks such as debt-based crowdfunding where you would have to repay whatever money you raise, there are more than enough crowdfunding options to suit consumers needs.Overall, the future of crowdfunding looks bright as it is inevitable that FinTechs will continue to provide even more platforms to fulfil it.
