Roman Bodnarchuk - Fotolia
The Finnish arm of Sweden’s Nordea Bank will be the first Nordic bank to offer businesses access to the crowdfunding market by launching a technology platform in the summer of 2016.
The technology will enable investors to provide capital for growing businesses through automated processes – a major change for a bank as it will not be providing the capital but enabling other organisations or individuals to do so.
Startup businesses are increasingly turning to crowds for financing – the European crowdfunding market topped €6bn in 2015.
“Digitisation is transforming the banking industry and we want to be part of that transformation,” Topi Manner, CEO of Nordea Bank Finland, told Computer Weekly. “We will offer startups and growth companies the chance to find funding through a digital platform and bring together investors and companies in need of financing.”
The financial middle man
The platform, Nordea Crowdfunding, will operate an investment model where investors receive a proportion of the company’s shares in return for funding.
Nordea will not give investment advice regarding companies on the platform, instead only acting as the intermediary in the process.
Nordea has developed the service together with IT company Futurice and post-trade services provider Euroclear Finland, which manages the country’s digital register for securities ownership.
“This means we have been able to integrate the platform with the book-entry system in Finland (which records ownership),” said Manner.
Furthermore, while the crowdfunding platform is separate from Nordea’s online banking services, data will be visible on a customer’s online bank after being transmitted by Euroclear Finland.
Nordea originally planned to build the service on a cloud-based platform entirely independent from its core IT, but claimed financial regulation made this too complex. Consequently, the platform is currently hosted on the bank’s servers and will be moved to the cloud when suitable technology is found.
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Nordea has timed its market entry to coincide with the introduction of a Crowdfunding Act in Finland, scheduled to come into force on 1 July 2016 and aimed at establishing legislative ground rules for crowdfunding, clarifying the responsibilities of different authorities, as well as increasing financing options for small- and medium-sized enterprises (SMEs).
The legislation will also ease the regulatory burden on the intermediaries in investment-based crowdfunding and improve investor protection.
Manner said new legislation and growing demand for crowdfunding services were the key reasons why Nordea was launching the service first in Finland.
In 2015, the Finnish crowdfunding market grew by 48% year-on-year to reach €84.4m. Equity crowdfunding represented €15.5m of this amount.
Nearly two-thirds of bankers believe retail peer-to-peer (P2P) lending will be available via banking platforms soon. In the UK, Metro Bank announced in 2015 it was offering loans through P2P lending platform Zopa and RBS struck a deal with P2P lenders Funding Circle and Assetz Capital to refer them to small business customers.
Manner said the trend of new digital forms of funding and lending will only grow. He added a major part of digitisation is mediation, as companies such as Uber and AirBnB merely mediate taxi and accommodation services.
“The same applies to financing. A greater share of financing will be digitally mediated between investors and those in need of funding,” said Manner. “A bank’s balance sheet won’t be tied up any more. Instead, the bank acts as the intermediary. This is what we are trying out and learning more about this market.”