This is a question that many experts in economics have been asking themselves for a long time. There’s a growing preference of financing through crowdfunding for entrepreneurs and individuals with a dream. Is private banking  in danger of extinction…? We’ll talk about the topic with new points to evaluate.

Crowdfunding and private banking

For a long time and since the arrival of crowdfunding, many people have said that banking would disappear. Or that it was under risk since the companies and entrepreneurs could prefer this method of financing before them. Which at first glance, seems very logical and expected.

However, lots of experts in economics and business have come out in defense of banking. Presenting arguments and clear reasons of why bank financing won’t be displaced by crowdfunding and why it’ll remain in force today. To which it’s also important to pay attention.

Related: Banking vs. Crowdfunding: Who survives?

First of all, a financial institution regulates the money that passes through it for good reasons. In regards to investments and loans, of course. One of them is to evaluate start-ups or projects that require financing. To determine how big is the risk involved in investing in them or not.

In crowdfunding platforms, it’s possible to see a great variety of projects and start-ups uploaded at their discretion. Then it’s up to people to decide whether they’ll make a contribution or not, something that isn’t safe if they don’t have enough knowledge in business matters. Because an initiative may look promising, but its success is not guaranteed.

Banks have included crowdfunding

And not recently. It should be noted that banks were aware of the presence of this well-known financing method that became fashionable. And some of them started to include it in their business for a variety of things. From allowing the financing of start-ups to financing more personal causes.

One of the financial institutions to do so was BBVA, which many years ago launched a service called BBVA Friends&Family in 2012. Through it, funds could be raised for personal causes such as caring for the home or to support a loved one. Then it was renamed BBVA Suma and became a crowdfunding platform until its closure.

According to an article in the Colombian finance website Dinero, financial associations of the government of Colombia began to recognize crowdfunding as “a new player in the market”. And this is an affirmation that has been spreading in those places where crowdfunding was previously seen with mistrust.

In a nutshell, banks aren’t seeing crowdfunding as a threat. On the contrary, they’re seeing it as a new opportunity to adapt to new technologies and obtain more advantages. But above all by offering new opportunities for their clients in addition to bank loans and investments.

What many pointed out as a struggle ended up being an alliance. Even so, there are start-ups and companies that can only obtain an appropriate financing in the banks where benefits and equity are obtained. Contrary to crowdfunding, where there are good projects, but few banks would dare to finance them because of their high risk.

Bank Investments Crowdfunding
Banks don’t usually offer loans to projects they consider high risk. But certain companies or start-ups can still (and prefer) bank financing. For being more viable for their business models.

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Related: What To Do When You Finish Your Crowdfunding Campaign?

Crowdfunding and banking are coexisting in peace…