| Summary: | In the aftermath of the global financial crisis, the funding ability of banks has declined resulting
in a financial void for riskier enterprises, such as startups and early-stage companies. New financial
service providers have emerged in response to the capital deficiency. A particularly
prominent incarnation of alternative finance is crowdfunding, where the funding is gathered
directly from the market, from several individuals, who invest relatively small sums to compound
the target amount. Financial institutions are contemplating the use of crowdfunding, not
only for its business implications but also as a preparation for the potential threats it may impose
on the traditional finance industry.
This thesis sets out to explore the potential use of crowdfunding in the banking industry by examining
the key motivations of banks to enter the novel industry. First, the thesis aspires to determine
which of the financial instruments, debt, equity or donations should a bank construct its
crowdfunding mechanism around and secondly, determine if a bank should enter the market
through an arms-length collaboration, by building a platform internally or by setting up an independent
subsidiary. Additionally, banks’ motivations and attitudes towards novel financial
technologies and the development of the industry are scrutinized.
The research was conducted as a qualitative field research, where the primary data was collected
from seven interviews. The interviewees are banking professionals working for banks in Finland,
Germany, Netherlands and Switzerland. Additionally, a ministerial adviser, whose expertise
encompasses the regulative issues of crowdfunding, was interviewed. The secondary data
for this research consists of existing crowdfunding research and articles.
The empirical analysis indicates that crowdfunding does not currently represent the key focus
for banks, but is rather seen as an adjustment to digitalization and as a means of elevating their
image. Lending-based crowdfunding instruments closely resemble banks’ current offerings and
could be more easily implemented than their equity counterparts. On the other hand, equitybased
crowdfunding could broaden banks’ current customer base and extend investors’ investment
opportunities. However, facilitation of equity crowdfunding is not amongst banks’ core
competences and would likely require banks to obtain vast external capabilities. The analysis
shows that setting up a subsidiary for crowdfunding could provide the lightest regulatory environment
for Finnish banks, while collaborating with an existing crowdfunding platform could
facilitate the easiest entrance to the crowdfunding market.
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