How will the development of non-bank Internet financing be carried out, for example in the form of crowdfunding planned for implementation by business entities of development investment projects in the future?
The importance of financing investment and development projects through crowdfunding will grow, however, in the coming years it will not replace most of the value of external financing conducted by banks in the form of loans and other forms of financing offered by banks. Even if in the coming years various forms of external financing through crowdfunding and other forms of financing were also quickly developed, also by Internet hauliers, technological internet companies, fintechs, etc., the banking sector in financing investment projects will still dominate due to the current domination scale . however, this domination scale should decrease.
In some areas of financing investment projects, this scale of banks' domination can quickly decrease, eg in the area of financing dynamic development of newly created enterprises, innovative startups and technological projects that do not require high capital involvement but because of the innovative and innovative nature they are difficult to assess creditworthiness by banks and burdened with a high level of investment risk. In this area of enterprise development, various forms of financing available on the Internet, for which it will not be required to carry out a typical creditworthiness analysis, financial credibility, precise measurement of credit risk, investment risk etc., will develop rapidly.
Lack of a classic creditworthiness analysis, financial credibility, precise measurement of credit risk, investment risk, etc. or the analysis in a simplified form will result from spreading investment risk on many financing entities and limited financial information, no history of deployment business entity seeking financing for development, investment, etc. The process of combining financial institutions and financed entities carried out in online intermediaries is either limited to the function of an independent intermediary and then the entire investment risk is taken over by the financing entities or an internet technology company equipped with parabank instruments finning, fintech type will gradually take over some functions of banks and will develop investment risk assessment systems, I participated in the development of these online, non-banking forms of financing.
The scale of external financing through, for example, crowdfunding, including the value of lending or share financing transactions should gradually increase. The value of transactions in the financing process of individual investment projects should reach increasingly higher values. However, unlike a typical bank loan, even if crowdfunding will finance the implementation of a high budget development project, investment in the development of innovative costly technology, individual investors do not have to bear high financial, investment, credit risk etc. because each financing entity can have a relatively small share of financing in the context of all the necessary amount of financial resources obtained from this form of non-bank, external financing.
The development of these various forms of financing investment projects available on the Internet, including crowdfunding will correlate in a given country with the pace of internet development, technological, innovative, etc. economic enterprises, with the development of online electronic payment infrastructure, fintech development, electronic banking security, internet services public institutions and the awareness of citizens, including entrepreneurs in the scope of security and risk of using online, non-bank forms of external financing, i.e. available in the form of crowdfunding.
Therefore, the procedures for the analysis of clients' creditworthiness developed in fintechs, accepted forms of collateral for crowdfunding transactions and other non-banking forms, improvement of financial risk management processes and information transfer on the Internet will be carried out in significantly different forms in relation to how it is done classic deposit and credit banks. Both the procedures for assessing the level of investment risk operating in fintechs and other Internet intermediaries, legally established forms of securing financial capital borrowing or capital investment, improved methodologies for point-based evaluations of the financed entity, standards for assessing high risk investment activities of a new type of development project planned for implementation by for example, an innovative startup, etc. will be significantly different from those procedures and methods of risk analysis, financial and credit risk management processes, etc. that are used in the banks of classical deposit and credit banking. Slightly more common features in this area may appear in the future between fintechs and banks and investment funds, which are already investing in innovative, developmental and high-risk investment projects.
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Do you agree with me on the above matter?
How will the development of non-bank Internet financing be carried out, for example in the form of crowdfunding planned for implementation by business entities of development investment projects in the future?
What will be the development of non-bank financing of investment projects in the future?
Please reply
I invite you to the discussion
Thank you very much
Best wishes
Dariusz Prokopowicz
INTERNET FUNDING OR CRIWFUNDING is small scale aimed at project owners with credit unworthiness and specukative projects. There are intrinsic problems with it, despite its apparent "innovativeness" of being an alternative to bank loans---which the organized capital market (both regulated exchanges and OTC) already srved. An unregulated market tends to be speculative and, therefore, puts its efficacy and creditability into question. Does it have future? Prospect is dim unless the disorganized and informal crowd becomes an organized market. In order to succeed this type of funding sources must target credit worthy projects and not to entertain "desparados."
I believe the future of non-bank financing as well as the broader aspects of the economy will be shaped by the interaction of crowdfunding, microfinance and start-up. there will be a new ecosystem outside the conventional banking system where the rules of the game are determined by these three constituents.
in future the non-banking financing will even more emerge. we already have models of such funding, like kickstarter.com where people across the globe do crowdfunding ..
This is a fine question pushed too far into the future. The jolt of non-bank financing emerged a few years back. It is a mark of the fourth industrial revolution, and the paper below will help with the timeline. Now, recall that banks sprouted as nodes of oligarchy. And technology is shattering the walls of oligarchy. So, we are seeing the end of banking as we know it.
Here is the paper on the timeline of 4IR: Preprint Transport and the Fourth Industrial Revolution
Non banking financial Institution - Should be under IRDAI norms in India otherwise financial institution just vanishes one fine morning !
Dear Colleagues and Friends from RG, The above discussion inspired me to the following considerations. In connection with the development of technological internet companies, including fintechs developing their business models based on the sale of specific information services on the Internet, a new type of competition with online banks is growing. Online banks fearing this competition enrich their offers of financial services with additional advisory and support services for enterprises, including legal advice, e-accounting, e-mails and SMSes reminding of upcoming payments to be made in relation to state offices and institutions as e.g. regarding the tax system. In addition, other business support services, such as the creation of website templates for companies on the electronic bank's website, for use by entrepreneurs who open a company account in an electronic bank. On the other hand, Internet technology companies and other fintechs operating on the Internet as part of e-commerce and / or running online stores or offering certain information services via the Internet take over from banks, develop on their portals tools enabling making payments for delivered products and services and offer para-finance instruments in the form of so-called interest-free and cost-free "loans" granted, for example, to users of a particular portal to complete purchases on the website. A similar solution is also developed by social media portals that offer their users such interest-free and cost-free "loans", and in principle they are rather non-repayable loans or subsidies to start a paid advertising campaign promoting a specific post, banner, photo, film, etc. on social media portal. Also, some Internet technology companies and other fintechs operating on the Internet are developing their cryptocurrencies, which will be able to pay for their online services and products by users of specific internet portals, including social media portals. In connection with the above, the question arises whether in the future Internet technology companies and other fintechs will offer their clients paraffinous services based on cryptocurrencies? In addition, whether they will borrow money among themselves based on settlements made using cryptocurrencies, e.g. loans and deferred payment terms using cryptocurrencies created for their own needs. In the situation of settlements made between companies operating in different countries in which other traditional international currencies operate, such as USD or EUR, in this way the settling companies will not have to incur the costs of currency risk. If the development of para-financial services developed on the Internet by Internet technology companies, including social media and fintech websites, is implemented according to the formula presented above, then a new category of competition for banks and other financial institutions operating in the current formulas of financial systems will grow. In view of the above, an important question that is also worth answering concerns the question of new formulas for sources of external financing of investment projects implemented by internet technology companies and other fintechs and by Internet users using the services of these companies. Will the dominant form of external financing of investment projects implemented by internet technology and fintech companies be raising investment capital through crowdfounding and other forms of crowdfunding, i.e. bypassing the banking system? Will future forms of external financing of investment projects implemented by internet technology companies, fintechs, social media portals and other companies based on crowdfounding and financing of the purchase of certain internet services by Internet users be implemented with the use of cryptocurrencies?
Do you agree with me on this matter?
What do you think about this topic?
What is your opinion on this topic?
Please reply
I invite you to discussion
Thank you very much
Best wishes
Dariusz Prokopowicz
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