Pandemic Hits Crowdfunding Platforms: 22% Cease Operations

The crowdfunding market reached a value of $13.35 million in 2021, and the total value of the platforms is expected to reach $25.9 million by 2027.

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The number of crowdfunding platforms declined during the health crisis

According to Finnovista’s latest report, 22% of these institutions ceased operations due to the economic consequences derived from the pandemic, as well as to complications to be duly constituted under the Law to Regulate Financial Technology Institutions (Fintech Law) as Crowdfunding Institutions (IFC).

The platform’s report pointed out that the cost of obtaining the license may be a factor that reduced the number of crowdfunding institutions, in addition to the fact that within the segment there is a concern about operating with authorization, 50% of the startups consulted the regulator prior to their launch.

So far, the National Banking and Securities Commission has given the go-ahead to 14 institutions dedicated to fund real estate, business, and personal loan projects.

Among the authorized platforms are Fundary, Likideo MX, BXL Fintech, Doopla, Prestadero, M2Crowd, Cien Ladrillos, Play Business, Crowd Up Mex, CrowdLink, Ángeles en Ark, Top Kapital, Red Girasol and Yo te Presto.

However, they see more growth

Despite the reduction in the number of crowdfunding platforms, analyses indicate growth in crowdfunding operations, as it is estimated to reach an annual growth rate of 11.65% by 2027, according to the consulting firm Imark Group, while other forecasts are less optimistic, as they project rates of 2.33% in the increase of operations, according to Statista.

The crowdfunding market reached a value of $13.35 million during 2021, the total value of platforms is expected to reach $25.93 million by 2027, with an even performance in the different subcategories, according to Imark Group.

“What made the crowdfunding market evolve is the access to massified Internet, use of smartphones and on the other hand, the platforms have allowed investing very small amounts of money, in some cases from 100 or 500,” commented José Rodolfo López Quian, professor at the Instituto de Especialización para Ejecutivos (Specialization Institute for Executives).

In addition, Quian explained that the great attraction of the platforms lies in attracting a larger audience, especially young people, in addition to the fact that crowdfunding fintech companies seek solid projects with guarantees that ensure remuneration, and financing tends to be more accessible than in the traditional system.

The advantages offered by crowdfunding institutions with respect to small investors do not yet have an impact on the size of the segment, since the number of platforms is significantly lower compared to others; fintech companies dedicated to crowdfunding represent 2%, according to Finnovista.

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First published in EL ECONOMISTA, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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