Blog

Crowdfunding: A must-have for FIs?

August 20, 2013 by Dan Kramer — Senior Vice President, Marketing & Merchant Servic, SHAZAM

In a recently released report, economists argue that the financial industry is facing a dramatic transformation due to increased online and mobile device usage. No argument there.

The economists go on to say, however, that financial institutions not investing in two areas in particular may be at risk of losing footing with consumers. Those two areas are mobile technology and crowdfunding platforms.

Forrester Research predicts that one in five U.S. adults will be using mobile banking by 2015. The economists believe this revolution will create a more efficient financial system with more productive FIs. However, they assert, mobile banking demand will also boost competition from nonbanks.

The report pronounced FIs ahead of the curve in mobile technologies. Even so, the advent of new crowdfunding platforms poses a significant threat to the traditional FI industry.

Crowdfunding, which is described as a "disruptive innovation that commercial banks cannot ignore," refers to the collective effort of individuals who network and pool their money, usually via the Internet, to support efforts initiated by other people or organizations.

According to the report, crowdfunding poses a unique challenge for FIs. Crowdfunding offers FIs a new competitor with lower operating costs, a different approach to risk management, and a simpler product offering.

The level of displacement commercial FIs in the retail and small business segments will suffer as a result of crowdfunding remains to be seen. However, FIs should be aware of and prepared for this trend, and make it work to their advantage.

In order to be successful in this technologically innovative, highly competitive environment, FIs must center their efforts on customer-based needs and expectations, says BBVA Compass chief economist Nathaniel Karp.

This will involve offering a variety of easy to use, convenient, highly secure products and services. It's also advisable to pay close attention to the crowdfunding trend.

Consider strengthening your FI's core business and investing resources by developing your own crowdfunding platform in order to stay competitive and relevant to consumers of the future.

Read more about trends and statistics.

About Dan Kramer

---

None

Connect with Dan: