Banks Face Rising Global `Crowdfunding` Competition

More than five years after the financial crisis in 2008, small businesses in Western markets are still struggling to borrow money from the banks. However, the combination of the financial crisis and the rapid growth in social networking (Web 2.0) has resulted in the emergence of a new form funding stream known as crowdfunding. This involves the raising of money from large numbers of networked individuals and institutions via the Internet. Crowdfunding is supported by the “platform” which is an intermediary firm (such as Kickstarter or Indiegogo) which brings together the investors (“the crowd”) and a small business wishing to raise finance via a website. Although this new form of non-bank lending isn’t seen as a threat to the traditional banking system, it does signify a serious alternative to traditional sources of finance for small, medium enterprises.