Santander Joins The Crowdfunding Revolution

By David Prosser for Forbes

Remember the days when crowdfunding platforms were the young upstarts threatening to disrupt the banks out of business? Well today, those very same platforms are signing partnership deals with the banking industry.

Step forward Crowdfunder, which has just unveiled a new deal with Santander Bank. The latter has committed £200,000 worth of funds to a matched-funding initiative aimed at the community projects, social enterprises and charities that raise money on the platform.

The idea is that if a fund raiser can convince Crowdfunder’s ordinary users to put up 50 per cent of the amount targeted, Santander will donate the other half of the money required. “Our purpose is to help people and businesses prosper and we recognise the important role social enterprises and charities play in helping communities to thrive,” explains Sue Douthwaite, managing director of Santander Business Banking.

This is a noble aim, of course, and Santander’s motivations should not be questioned – and Crowdfunder is a different type of platform to the Funding Circles, Zopas and Ratesetters of this world, which facilitate interest-bearing loans. Nonetheless, the initiative will have the valuable side effect of teaching Santander some practical lessons about the way crowdfunding works in practice – that will be very helpful for the bank, which has already made some tentative forays into new models of banking. In the US, for example, it has a tie-up with Kabbage, the online lender to small and medium-sized enterprises.

The broader point here is that having initially regarded the crowdfunding sector as of only minimal finance, the banking industry is waking up to its growing reach and scale – hardly surprising given the inexorable growth of peer-to-peer lending and similar technologies in recent times.

Indeed, Santander’s deal is just one of several collaborations between crowdfunding platforms and the broader financial services sector, albeit the most overt move yet by a high street institution into this form of alternative finance. Funding Circle has done a series of deals with investment funds and even the UK Government, for example. A number of other platforms now have institutional backing that enhances the financial firepower of their traditional user base.

First appeared at Forbes