Crowdfunding

on the rebuildingsociety.com blog

10th May, 2018

EU to Standardise Crowdfunding Regulations

The European Commission has unveiled an Action Plan on how to harness the opportunities presented by fintech, including the crowdfunding and peer to business lending sectors.

According to the EU commission Europe should become a global hub for Fintech, with EU businesses and investors able to make most of the advantages offered by the Single Market in this fast-moving sector. As a first major deliverable, the Commission is also putting forward new rules that will help crowdfunding platforms to grow across the EU’s single market. In addition, the Commission is proposing a pan-European label for platforms, so that a platform licensed in one country can operate across the EU.

This certainly seems like common sense, indeed, something that should have been implemented some years ago. As is frequently the case with orchestrating multiple governmental and regulatory bodies, the greater the need, the greater the difficulty in actually doing it. North America being a classic example, with 52 states requiring 52 regulatory licences, making the EU look half as complex by comparison.

Valdis Dombrovskis, Vice-President responsible for Financial Stability, Financial Services and Capital Markets Union, said: “To compete globally, Europe’s innovative companies need access to capital, space to experiment and scale to grow. This is the premise for our FinTech Action Plan. An EU crowdfunding licence would help crowdfunding platforms scale up in Europe. It will help them match investors and companies from all over the EU, giving more opportunities for firms and entrepreneurs to pitch their ideas to a wider base of funders.”

The opportunity becomes apparent once one considers the varying degree of affluence within the EU, and how interconnectedness through technology and singular regulation could flatten the somewhat bumpy ground. When investors in Germany can back small businesses in Bulgaria, either through loans or equity, it changes the market dramatically, potentially leading to high growth in some states and high returns for investors in others.

It is currently difficult for many platforms to expand into other EU countries. This is why crowdfunding in the EU is underdeveloped as compared to other major world economies, and the EU market is fragmented. One of the biggest hurdles is the lack of common rules across the EU. This considerably raises compliance and operational costs and prevents crowdfunding platforms from expanding across borders.

Today’s proposal will make it easier for these platforms to offer their services EU-wide and improve access to this innovative form of finance for businesses in need of funding. Once adopted by the European Parliament and the Council, the proposed Regulation will allow platforms to apply for an EU label based on a single set of rules. This will enable them to offer their services across the EU. Investors on crowdfunding platforms will be protected by clear rules on information disclosures, rules on governance and risk management and a coherent approach to supervision.

Oliver Gajda, Exec director European Crowdfunding Network was interviewed at Fintech North, viewable here. “Without that kind of interchange it must be very hard to achieve any kind of standardisation across the industry… It’s basically impossible …so what we have done in the crowdfunding and peer to peer lending space is to have a soft discourse and distribute knowledge on the market…we’ve also done research on platform operators and their operational challengers when they go cross border… in some instances, every member state, every regulatory body, have completely different views to others.”

And therein the problem. How long it will take to establish a cohesive EU wide regulatory framework for crowdfunding? That remains to be seen. And of course, the Brexit question hovers in the background, although in this instance a regulatory compatibility will undoubtably benefit all.

Daniel Rajkumar from Whitelabel Crowdfunding had this to say “While we have had the cooperation of BaFin and other regulators, each regulator has nuanced differences. A single regulatory framework will reduce complexity and encourage rapid expansion throughout Europe. WLCF customers using our peer to peer lending platform can benefit from our experience as well as relationship with rebuildingsociety.com (for compliance expertise and the appointed representative offering) and also Web-Translations for their professional translation services.”

Helene Panzarino, Managing Director at Rainmaking Colab had this to say.

In my capacity as a representative for a UK FinTech Standards Advisory Board, I’ve noticed the desire for crowdfunding platforms and associations to welcome standards and regulation in order to build trust and rigour in governance and practice, comes up when considering the pan-European landscape. The UK has led the way in championing crowdfunding and a number of our higher profile platforms have begun entry into other jurisdictions. Passporting, particularly in the light of Brexit, off the back of a nascent export scene seems a very logical route to examine and assess. Revolut, who raised on both Crowdcube and Seedrs, is now officially a Unicorn (on paper), and this could have significant impact for the industry.

 


02nd Nov, 2017

NorthInvest Leeds and Yorkshire FinTech Summit

On Tuesday, 14th November, the NorthInvest Leeds and Yorkshire FinTech Summit will be taking place at the KPMG offices in Leeds city centre. Daniel Rajkumar will be speaking at the breakfast event, which is scheduled to begin at 8:00am and end at 9:30am.

The summit is designed to bring together industry leaders from the region. Hosted by NorthInvest, in partnership with KPMG and Leeds City Council, the event will focus on creating a mandate for the establishing of a clear plan of action. Presentations, discussion and debates will be the first step in opening dialogue, and attendees will hear from FinTech experts and key players within the industry.

The event is a great opportunity to promote various FinTech opportunities in the region to interested parties, including prospective investors.

“I am very excited to be speaking at another event that focuses on the potential of FinTech in the north. We need to pool resources and create an open dialogue that can lead to collaboration,” Daniel explained.

Sign up for a place at the NorthInvest FinTech Summit soon to avoid disappointment!


25th Oct, 2017

CrowdConference 2017

Given our experience in the FinTech sector; not only in operating a P2B lending platform, but also building and maintaining client crowdfunding platforms; we and our sister company, White Label Crowdfunding, were invited to the third CrowdConference in Minsk. Daniel Rajkumar, founder and CEO of the two companies, represented the companies at the event, accompanied by Kylie Greeff, our Legal and Compliance Manager.

It was a dynamic, well-attended event, attended by a broad range of international entrepreneurs, government delegates, academics and traditional financiers. Day one of the conference focused on the current hot topics of AI, Big Data and Blockchain in FinTech, whilst day two concentrated on The Crowd Economy. Attendees enjoyed talks from of Mariya Dokshina, founder of Russian crowdfunding firm, Boomstarter; Andrey Golub, CEO of virtual reality company, ELSE Corp; and Dariusz Jemielniak, a member of the board of trustees of Wikimedia Foundation.

Crowdfunding in Belarus is growing fast, but is arguably a few years behind that of the more mature European market members. Currently, crowdfunding in Belarus is largely limited to reward-based crowdfunding, and its development appears to be closely linked to the development of the same market in Russia.

The enthusiasm and engagement of the delegates and speakers at the CrowdConference bodes well for the future of the Belarussian crowdfunding and Fintech industry. Daniel commented: “I am looking forward to working closely with a number of the contacts we made at the event. We hope to further grow our network of platforms and international partners, and develop new features that will continue to give our clients a leading edge when setting up their own platform.”


25th Oct, 2017

The Pace of Change in Financial Services

Last week, rebuildingsociety’s founder and CEO, Daniel Rajkumar, and Legal and Compliance Manager, Kylie Greeff, attended the 6th ECN Crowdfunding Convention in Vilnius, Lithuania.

The conference centred on the rise of new technologies for accessing finance, and featured presentations and panels from members of the international financial community.

Daniel was invited to take part in a panel on the topic: How are the banks and traditional financial actors reacting to a new paradigm of online access to finance? On the panel alongside Daniel were Jekaterina Govina, Counsellor to the Board of the Bank of Lithuania; Lasse Maekela, CEO of Invesdor; Mantas Zalatorius, Chairman of the Lithuanian Banks Association; and Yoann Nesme of PPL, a Portuguese rewards-based crowdfunding platform.

The panel, split between those associated with “old finance,” or traditional financial institutions, and those associated with “new finance,” enjoyed a very animated and direct discussion which was very well received by the audience.

It is evident within the finance sector that there is an increasing merge of old finance and new; many peer-to-peer platforms rely significantly on the engagement of old finance, for example, through the investment of institutional investors. Likewise, some old finance institutions are starting to consider new and innovative ways to improve their products and services for their existing clientele. As such, the main lines of discussion and debate at the event focused on whether traditional financial institutions are truly committed to, and open-minded about, working with and developing relationships with FinTech companies.

Daniel explained that banks in the UK have been obliged to collaborate with P2P platforms through the Business Referral Scheme. He commented that this program is widely considered to be ineffective, not only in terms of helping businesses find the right type of finance when rejected by the banks; but also in that the platforms by and large do not get access to the cream of the crop. The sentiment exists that the banks want to be seen to be new and customer friendly, but have not actually moved very far beyond a degree of marketing and PR spin.

Jekaterina said that she felt that the banks are moving towards closer collaboration with FinTechs, but that it almost seems like they are going through a cycle similar to the five stages of grief. “A few years ago, the banks were definitely in a state of denial about the potential of FinTech companies – particularly crowdfunding companies,” she explained. This was followed by a short period of anger and retort against such newcomers, and they are now, slowly, moving towards a state of acceptance.

Mantas, who has been brought in to his current position to accelerate the banks through the five-stage cycle, agrees that change within the banking industry across Europe is needed. He stated that recently, FinTech has been the only thing in financial services to drive the change; that the increasing integration and use of sophisticated software within traditional finance products has made the industry “flatter and more even”. He said that the industry desperately needs the “cooperation of the old guys and the creativity of the new guys,” and believes that the banks are making significant steps towards adopting the change.

Daniel disagreed with Mantas; he believes that the banks don’t really want to change, and that they aren’t “willing to self-sacrifice, like Amazon did with book sales for the Kindle.” He predicted that “we’ll see internet and tech companies becoming the new banks, just like we saw tech companies become the new music and film producers,” going on to highlight that if the banks need an example of what their future might look like, they only need to look to China and Alibaba’s Alipay and Yu’E Bao. “The future might be nearer than expected for the banks, with the release of the Payment Services Directive (PSD2) Regulations in early 2018,” Dan observed.

ECN 2017 2

Mantas agreed, saying: “PSD2 is something that the banks will have to get used to, and get used to quickly – which will be hard due to the slow nature of the banks.” However, he did go on to add a word of warning, explaining that while there is no doubt that PSD2 will bring a very high level of change and innovation, such a significant level of change in an industry that is slow to react, such as the finance industry, could risk breaking the current system completely, which would be a disaster not only for the banks but also many of the FinTech companies trying to make it in such a new sector.

“PSD2 will take away the advantage that the banks have had over FinTechs for so long,” commented Dan. “The live data will help more crowdfunding companies apply more intricate risk analysis models and implement better risk monitoring, and also allow these platforms and the consumers lending through them to better price the risk.”

It is clear to anyone familiar with the financial services market that there is a huge amount of change taking place, and that a large factor driving this change is an increased awareness and understanding of financial products – and their rights – on behalf of the consumer. More and more consumers do not want to have to visit a bank branch, instead expecting to be able to manage their finances from their smartphone while on the go.

Given the amount of data that consumers are willing to give away about themselves, knowingly or unknowingly, it is certain that data will drive innovation and change in the FinTech and crowdfunding sector for the foreseeable future. As such, the firms that survive will be those that are willing to change and adapt. For the first time in decades, it seems that the crowd and consumers are driving the changes of the financial institutions, but one must ask – in which direction? The thought of a company like Facebook entering the financial sector is no longer unrealistic. It may not be something that we would readily encourage or relish; but that doesn’t mean it won’t happen…


14th Mar, 2016

P2P Weekly: Growing Innovation

“UK Government Report: Innovation Growing as Officials Push to Make UK Best Country in Europe to Start a Company,” via Crowdfund Insider

According to UK government data, 53 percent of small businesses are pursing new products and services. Business Secetary Sajid Javid said: “From new disruptive business models to driverless cars, innovation can not only revolutionise the way we live our lives, it can bring real opportunities for businesses to tap into and grow. That is why we are determined to make the UK the best place in Europe to innovate and start a company…these figures show that businesses throughout the UK are already leading the way, delivering exciting opportunities across the nation. The number of companies innovating and coming up with new, dynamic ideas is on the rise – up 8 percentage points between 2012 and 2014, with over half of businesses now developing new products and services, some with the potential to revolutionise their industries.”

“CFPB Now Accepting Complaints on Consumer Loans from Online Marketplace Lender,” via the Consumer Financial Protection Bureau

After months of mostly quiet talk about further regulating the alternative lending market in the U.S., the Consumer Financial Protection Bureau is officially accepting complaints from consumers who encounter problems with online marketplace lenders. You can read the bureau’s statement above.

“Real-Time P2P Payment Platform Early Warning Live on BoA,” via Crowdfund Insider

Bank of America, one of the largest financial institutions in the U.S., will now process real-time P2P transactions through Early Warning’s clearXchange network. BoA joins numerous other banks, including JP Morgan Chase and Capital One, that use the network.


10th Mar, 2016

Crowdfunding and P2P are Booming in the UK, Nesta Report Confirms

Alternative finance claimed 12 percent of small business lending in 2015, a sizable share of a rapidly changing market.

That’s according to a report titled ‘Pushing Boundaries’ by Nesta in collaboration with the University of Cambridge. This report is part of an annual series from the institutions that analyzes the alternative finance industry, including P2P lending and crowdfunding. Another key takeaway is that the sector grew 84 percent in 2015 and facilited £3.2 billion in loans, investments and donations — nearly doubling over 2014. More than 1 million people invested via online platforms in 2015, and 254,721 individuals, projects, not-for- profits and businesses raised finance via online alternative finance models.

And that rapid growth seems poised to continue, especially as banks and other financial institutions get in on the action. Institutions are increasing their stake in alternative finance, as Nesta’s report demonstrates.

And, institutional investors are taking the online marketplace more seriously. About 45 percent of all platforms reported institutional involvement. Donation-based and equity-based crowdfunding grew exponentially in 2015.

Of the total market, peer-to-peer business lending comprises £1.49 billion, almost doubling the amount lent in 2014. £881 million of that is in non-real estate lending projects, like rebuildingsociety.com. The peer-to-peer business market experienced an increase in automated lending and in secured loans.

The report projects that the alternative finance sector will grow to more than £5 billion in 2016.

“With increasing public and business awareness and the introduction of the Innovative Finance ISA, opportunities are abundant for the alternative finance industry in 2016 as well as challenges. From the peer-to-peer lending side, the challenges for 2016 are likely to be deal origination, credit risk modelling and underwriting. For equity-based crowdfunding, the challenges are not too dissimilar. The focus is likely to be on deal flow, due diligence and dealing with business failures as much as successes.”

Nesta’s report concisely demonstrates the sharp growth of various sectors of the alternative finance sector. As these industries continue to grow, we’re thankful for institutions like Nesta that keep tabs on industry growth and trends so we can make the rebuildingsociety community even better.


09th Feb, 2016

Collaboration with investUP Helps Bring Investment to the Masses

At rebuildingsociety, we are pleased to be collaborating with investUP, an investment aggregator that launched last year – and today, they have a brand new website that will make the user experience even more seamless and powerful.

At investUP, users can streamline their investing experience across 25+ crowdfunding sites from one account. This is ideal for investors who have accounts on 8-10 platforms, explains co-founder Dom Wolf.

investUP has a simple mission. Says CEO James Tuckett: “We’ve focused the platform on the very real challenges faced by the crowdfunding industry today. Today investing isn’t an everyday thing – it’s associated with those in the know. Today savings and investment options for regular people are rubbish. If you’re one of the 99% you’d be lucky to earn yourself a measly 1% return. Well, our answer is a people friendly portal to access the entire P2P & crowdfunding market, and we’re launching it at Finovate today.”

rebuildingsociety is built upon that same passion for making high-return investing accessible to the masses, which makes this a particularly apt partnership. And rebuildingsociety’s exemplary API makes it even easier for investUP users to lend to rebuildingsociety borrowers.

“We’re trying to encourage more and more sites to have APIs, and we’d be happy if more sites used rebuildingsociety’s API because we’ve done all the work to integrate it,” said Wolf.

As investUP moves into its next phase with a new website and many new features, rebuildingsociety remains enthusiastic about the collaboration. Says rebuildingsociety managing director Daniel Rajkumar:

“We’re excited to be a featured platform on investUP, an aggregator that shares our goal of bringing smart investment opportunities to everyone. Our API allows InvestUP users to seamlessly lend to rebuildingsociety borrowers. InvestUP are a great team and we look forward to building on this relationship for years to come.”

You can visit investUP’s new website today!The site includes new features, including Club Up, an social tool that gamifies the investing process and allows users to connect with other lenders, see what they’re lending and more. The site has also improved its search mechanism to take the guesswork out of the process. A semi-randomized search will present users with a set of opportunities from among the more than 100-150 deals available at any time.

We believe this partnership represents a growing interest in P2P lending throughout the UK as well as the industry’s ever-expanding capacity to adapt to technology, promote small businesses and put user’s needs first and foremost.


18th Jan, 2016

P2P Weekly: FinTech Gains Traction as 2016 Kicks Off, and Other News

“Why smart businesses are turning to crowdfunding,” The Telegraph

A look at what makes crowdfunding and peer-to-peer lenders promising markets in this new year.

The Telegraph notes: “from next year, hundreds of thousands of investors are expected to pour money into crowdfunding and peer-to-peer when qualifying investments become eligible for Isa status. From April 2016, individuals will be able to keep many crowdfunding and peer-to-peer returns tax-free as part of their ISA allowance.”

“Kickstarter Reports 64 Percent Increase In Pledged Donations,” Tech Times

Campaigns for tabletop and video games received the bulk of Kickstarter pledges in 2015. Across categories, people are donating less money to smaller projects, opting instead to go with campaigns by individuals and companies they already trust. This is a response in part to more and more Kickstarter projects failing to follow through with promised rewards.

“P2P ISA Challenge: “We Recognize that We as an Industry Need to Work to Persuade Advisers to Embrace P2P Lending,” Crowdfund Insider

“The introduction of the new ISA also highlights an ongoing issue for P2P platforms: The profound need to inform and educate potential investors and advisors of their services.”

“CIBC CEO Victor Dodig on banking’s tech revolution,” Canadian Business

Canadian banking leader Victor Dodig commented on the potential threat that peer-to-peer lending poses to traditional banking, saying: “With the small-business segment, speed matters more than price. In the consumer segment, speed matters, but price matters as well. That’s where the peer-to-peer lenders can actually drive a wedge, but we won’t let them do that.”


23rd Jun, 2015

Peer To Peer Lenders Need Not Fear “Shadow Banking” Risks

Attempts by some in the banking world to associate peer to peer lending with “shadow banking” simply don’t pass muster.

Shadow banking typically refers to hedge fund, private equity and other activities of the type that the International Monetary Fund says contributed to the economic crisis that began in 2007. As bank leaders try to paint peer to peer lending with that same brush, leaders in the P2P industry like Zopa founder Giles Andrew have been quick to distance themselves from shadow banking as a label and approach to finance.

“When Zopa became the first P2P platform to launch in 2005, we knew that persuading consumers to trust us with their cash was crucial to our business. This meant being a transparent and responsible lender from the start, extending credit to “super-prime” borrowers and building a risk function robust enough to withstand the seismic economic shocks that came along a few years late,” Andrew stated. “The activities of the P2P lender that I helped set up, Zopa, are as far from shadowy as the most diligent regulator could hope for. A founding principle of P2P lending is to ensure that platforms are open and transparent about lending.”

Likewise, rebuildingsociety.com endeavours to uphold the highest standards of financial integrity, user trust and transparency.

“It’s great that people are beginning to think of the peer to peer industry as trustworthy enough to be considered an alternative to the banks, but the differences between the two models are noteworthy,” said Adam Knott, rebuildingsociety.com’s Digital Marketing Manager. “rebuildingsociety.com will always strive to offer a fair and transparent service and a genuine choice for investors and borrowers alike.”

As the banking model is challenged by alternatives, it may continue to vilify those it views as competitors. However, good peer to peer lenders will continue to pursue a promising financial model with a spirit of fairness and honesty.


21st Oct, 2014

Why The Professional Chose Equity Crowdfunding

We like to cover all kinds of crowdfunding in our blog, so here is a story that might give you food for thought if you’re looking at raising cash for your business through the crowd – a loan isn’t your only option…

John McLeod formed The Professional in 2013. It is a publication dedicated to the Leeds business scene and is an example of a throwback to a regional news agenda that was almost eradicated as pressure on traditional newspapers by the internet grew at the turn of the century. rebuildingsociety can see the potential of the business and has supported it since the start with advertising and editorial contributions.

John said: “The Professional was created as a result of me being on the enterprise scene in Leeds for the past 4 years. During that time I met some amazing business people with great stories to tell. There weren’t any regional business publications creating content in a feature led format, and I believed by telling these stories they could inspire others to go and achieve success also.

(more…)


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