The time has come for crowdfunding to mature – or die, and be reabsorbed by the body politic (or should that be that body corporate).
You don’t hear people talk about “the democratisation of finance” much any more. Why is that?
We’ve seen growing pains aplenty- especially in the USA as the revolution was more a whimper than the expected bang once the regulator finally allowed any action. Prompting a good deal of navel-gazing – “where did we go wrong”. To answer that question zoom out a bit and take a look at the rules, friction and the environment they create.
We’ve seen crowdlending, let’s face, invaded by the antibodies of the body corporate to become, for the most part, overwhelmed by their money and little more than traditional lenders moved online.
Was this really the dream?
In the equity side, we’ve seen the unaccredited crowd (i.e., the crowd – apart from a tiny minority composed of the ‘usual suspects who already had access) progressively being squeezed out. By a combination of rules and assumptions based in old ways, and the behemoths.Together with an undercurrent (or is it the tide) of pressure from the establishment – who liked finance just fine the way it was before 2008/9, thank-you-very-much.
Developments in the UK, which has led the field by blazing a new trail, casts a new light on what’s going on here.
A year or so ago, so the story goes, after a long search across the globe, the UK’s financial regulator, the FCA, finally found their man to replace Sheriff of Dodge, Martin “Shoot First, Ask Questions Later” Wheatley, as its head… right on their doorstep. Strange that.
With the Fintech revolution in full swing and the UK it’s undoubted flagship who they chose hardly seemed to matter at the time… unless you read the long game.
And Andrew Bailey, who’s name used to appear on all our banknotes has kept his head down, letting some other establishment figures (such as Adair Turner) make the running – until now.
The same Andrew Bailey, who is it turns out the quintessential banker’s banker (and one of the architects of the system which gave us the global crash), is not so comfortable with the revolution after all.
Struggling to keep up you’d think he’d be looking for some remedial classes (there is a new Fintech course just been accredited – wonder if that might suit him”).
The FCA says that it is concerned about the pace of innovation – quite a departure from the stance of Project Innovate, saying;
“While the FCA has placed great weight on promoting innovation in financial services in general, we are growing increasingly concerned about the speed of change in the investment-based and loan-based sectors [of crowdfunding]”.
So Project Innovate has just become “Project Innovate a little – but not too much.” We wouldn’t want to rock the boat now. Would we?
The FCA Review says: Loan-based and investment-based crowdfunding
“For both loan-based and investment-based crowdfunding platforms we have found that, for example: it is difficult for investors to compare platforms with each other or to compare crowdfunding with other asset classes due to complex and often unclear product offerings”
Which reveals either a complete failure to understand equity crowdfunding – that it is not just an ‘asset class’ and can’t be encompassed through that lens – or a determination to ban it for the convenience of either the incumbents or the regulator.
It’s all – as one must expect in the long-game – hidden in warm words that sound innocuous.
What it means is that the Banker’s Banker is tightening the establishment’s grip on the only engine of change.
The British Establishment have been playing ‘the long game’ for a very long time indeed – as the colonies will recall (how’s it going out there in the Americas? Plantations going OK?)
If there is to be a revolution or any change of note to the way finance works and funnels wealth away from the majority to into the coffers of the 1%, then we are going to need to also play the long game – and win. Or at the very least learn to read and understand it and find a better way to counter it.
But would the UK really relinquish its, already slightly eroded, lead in Fintech, for the benefit of the bankers?
To answer that question you have to think about who’d be making that decision. After the crash, the then coalition government here rolled up its sleeves, principally those of Vince Cable the Business Secretary, to make changes and hold the banks accountable. None of this happened, worth a damn, and far from taking any responsibility the banks have played their own long-game leaving the government looking toothless and laughing into the champagne breakfasts bought with their expense accounts and ever-swelling bonuses.
So who would be making that decision?: Right now it’s the Bankers Banker. The Fox currently in charge of the henhouse – unless or until – PM Theresa May’s government reads the game just a little better – and gets serious about creating “an economy that works for everyone” which she promised from the steps of 10 Downing Street in her acceptance speech.
Perhaps Andrew Bailey, uncomfortable with the pace, and one must suspect much more comfortable with the status quo while it was his signature on the banknotes, could do with a little help in that direction – or at least a little democratic scrutiny, right now?
Barry James is a serial entrepreneur and technologist, writer and conference creator who founded TheCrowdfundingCenter, now a global resource for #Crowdfunding, & FundingHubs an innovation to support entrepreneurs globally. He has a long history in #Fintech stretching back to the late 1970s. Founder of the UK’s first national conference, Crowdfunding:Deep Impact, he has been at the forefront of the development of Fintech and crowdfunding in the UK, and internationally, since its earliest days helping found the UK’s All-Party-Parliamentary-Group on the subject and, founding #RegTech, influencing the nature and direction of regulation. As a pioneering systems and ecosystem architect, he and his team remain active in creating new models and new technology, including the creation of more than 100 funding hubs worldwide.