Crowdfunding: What Every Financial Services Leader Needs to Understand and Can No Longer Afford to Ignore

The crowd has found its capital. The question now is whether established institutions will shape what comes next, or simply watch from a well-upholstered armchair whilst the market moves on without them.

By Jonathan Hartley, Senior Adviser, Financial Services Strategy · 20 years in the industry

I have spent the better part of two decades advising banks, insurers, and wealth managers on how to navigate structural disruption. In that time, I have watched the industry cheerfully misread the internet, dismiss mobile banking as a “niche concern,” and spend considerable energy debating whether fintech was a fad. It was not. Crowdfunding, in its matured European form, deserves the same clear-eyed attention — and rather more urgency.

European crowdfunding has grown into a €15+ billion industry (Cambridge Centre for Alternative Finance, 2023). More importantly, it has grown into a credible one. The platforms that have survived are not disruptors in the breathless, TED-talk sense. They are, increasingly, sophisticated origination and distribution machines that are eating into territory that banks once considered theirs by birthright.

This piece is not a primer on how crowdfunding works. It is an assessment of where it stands, what the risk-return profile genuinely looks like, and — critically — why the most interesting story is no longer about fintech versus banks, but about what serious collaboration between the two can produce.

The three models worth understanding

Crowdfunding is not a single product. It encompasses meaningfully different structures, each with its own risk characteristics and investor base.

Debt-based platforms — the most mature market

Funding Circle — the benchmark for P2P lending at scale

UK-founded, 2010 · SME debt · Pan-European operations

Funding Circle matters less as a novelty and more as a data point in what P2P lending looks like when it matures. A decade of credit data across economic cycles is genuinely valuable. The return profile — modest above savings rates, but meaningful for a retail investor — has remained broadly stable. The risks, however, are structural and should not be underestimated by advisers or institutions.

Key risks:

Credit risk: SME default rates are cyclically sensitive. During the 2020 downturn, rates spiked materially across P2P platforms.

Liquidity risk: These are illiquid instruments. Loan terms of one to five years mean capital is tied up, with limited secondary market options.

Platform risk: If the operator fails, recovery processes are complex, underregulated, and slow.

Equity crowdfunding — venture capital for the many

Crowdcube — the equity platform with a verifiable track record

UK-founded, 2011 · Equity stakes in early-stage businesses

Crowdcube’s most famous alumni — Monzo, Revolut, BrewDog — have done its marketing for it. But I would counsel against drawing too many conclusions from the headline exits. For every Monzo, there are dozens of businesses that raised enthusiastically, spent earnestly, and disappeared quietly. The honest framing for equity crowdfunding is portfolio investing with asymmetric outcomes: most positions will return nothing; a small number will return multiples.

For wealth managers, the more pertinent question is whether retail clients truly understand this. In my experience, they frequently do not — a fact that creates compliance exposure and reputational risk that deserves serious governance attention.

Key risks:

Illiquidity: Exits in private markets routinely take five to ten years. This is not a bond with a maturity date.

Dilution: Follow-on funding rounds will reduce your stake, often significantly, with limited investor recourse.

Valuation opacity: Early-stage valuations are partly science, largely negotiation. Investors rarely have the information to challenge them.

Purpose-led debt — the ESG opportunity

GoParity — sustainable project finance at retail scale

Portugal & Spain, 2016 · Impact footprint · €200m+ funded

GoParity is instructive for a different reason. It demonstrates that impact-aligned investing is not, in and of itself, protection against project risk. A solar farm can underperform. Government subsidy frameworks change. Construction timelines slip. The ESG label improves the story; it does not improve the credit. Institutions building out responsible investment propositions should take note: purpose and prudence need to coexist.

has recently bought the spanish company Bolsa Social, making it a reference in the iberian market. While has expanded to Canada and last week deployed the first Asian/APAC project.

The real story: when banks get involved

For the purposes of this analysis, the more consequential development is not what crowdfunding platforms do independently, but what they do when they partner with established financial institutions. This is where the structural opportunity — and the structural complexity — becomes genuinely interesting.

Three distinct models have emerged in Europe, each representing a different theory of value and a different allocation of risk. Understanding the distinction matters enormously for any institution considering entry.

Model 1: Co-investment — Banca March (Spain)

The bank as anchor investor

Banca March’s approach is the most direct: the bank commits 70–80% of the capital to a project — typically commercial real estate or SME lending — and then opens the remaining allocation to retail investors via a platform. Target returns of 6–10% annually position it squarely in private debt territory.

The appeal for retail investors is real. They gain access to institutional-grade deals with minimum tickets that are a fraction of what direct participation would require. The bank’s credit analysis is, in theory, doing the heavy lifting.

The risk, however, is equally real: investors are wholly dependent on the quality of the bank’s underwriting. If the institution’s due diligence is sound, the co-investment model is genuinely compelling. If not — and banks are not infallible, as the events of 2008 demonstrated with some enthusiasm — the retail investor has no independent protection.

Model 2: Trusted referral — ING (Netherlands)

The bank as connector, not co-investor

ING has taken a more conservative position: rather than committing its own capital, it refers SME clients who do not qualify for traditional lending to platforms such as Lendahand. The bank provides its implicit endorsement; the platform handles origination and risk.

This is operationally elegant and reputationally sensible. ING retains the customer relationship whilst sidestepping direct credit exposure. The bank’s “approval” signals quality to investors on the platform.

The limitation, however, is worth stating plainly. ING has no skin in the game. Its referral carries no contractual weight and no financial commitment. Investors receiving “ING-vetted” opportunities should understand precisely what that designation does — and does not — guarantee.

Model 3: White-label integration — Banco BEST & Raize (Portugal)

The hybrid proposition — crowdfunding inside the bank’s own interface

The 2023 partnership between Banco BEST and Raize is, to my mind, the most structurally interesting of the three models. Raize originates and underwrites loans in SME lending; Banco BEST brand-labels those opportunities within its own digital channels. Investors access Raize-originated deals through what feels — and functionally is — a banking interface.

The bank provides the trust layer — escrow accounts, regulatory standing, brand equity. Raize provides origination expertise and deal flow. The combination lowers the barrier for investors whilst preserving the bank’s relationship primacy.

The residual risk is concentration: a significant proportion of Raize’s loan book sits in Portuguese real estate, a market that has experienced meaningful price appreciation and carries bubble risk. That is not a reason to avoid the model; it is a reason to ensure clients understand what they own.

“The question for financial services leaders is not whether to engage with crowdfunding structures. It is which model suits your client base, your risk appetite, and your regulatory perimeter.”

The risk matrix — a clear-eyed view

The EU Crowdfunding Service Providers Regulation (ECSPR), in force since November 2023, has introduced a more coherent regulatory framework across member states. This is unambiguously good for institutional credibility. It is also, for smaller platforms, a meaningful compliance cost that will accelerate consolidation. Larger institutions considering partnership strategies should be selective: the counterparty landscape is changing.

The strategic case for financial services incumbents

I want to be direct about something. Financial services incumbents who dismiss crowdfunding as “retail investor speculation” are making a category error. The platforms that have survived a decade of operating in this space have developed capabilities that are genuinely difficult to replicate: origination networks, underwriting data at volume, and user experience quality that most banks would privately acknowledge exceeds their own.

The strategic logic for collaboration is straightforward, if you accept the premises:

For banks: Co-investment and white-label models generate fee income without requiring the bank to hold the underlying credit risk. They provide a retention mechanism for clients seeking yield above deposit rates — a segment that has been haemorrhaging to wealth platforms for several years. And they allow institutions to offer private debt exposure at retail scale, which has historically been the exclusive preserve of institutional investors.

For insurers: The illiquidity premium available in crowdfunding-originated debt is structurally interesting for long-duration liabilities. With appropriate due diligence frameworks and portfolio construction discipline, there is a case for selective allocation — particularly in the ESG-aligned project finance space, where regulatory tailwinds are favourable.

For wealth managers: The diversification argument is real. Crowdfunding-originated assets have low correlation with listed equity and bond markets (during normal conditions — the correlation rises in stress events, as it does for most alternatives). For clients with appropriate risk tolerance and liquidity needs, a modest allocation adds genuine portfolio value. The governance challenge — ensuring suitability, managing concentration, explaining the structure clearly — is the work that advisers need to do before recommending it.

Where I would focus attention

If I were advising a leadership team in any of these three sectors today, my practical recommendations would be as follows.

First, assess the white-label integration model seriously. Of the three bank-platform structures described here, it offers the most favourable combination of client value, revenue potential, and reputational control. Banco BEST’s approach with Raize is not perfectly scalable to every market — but the architecture is sound and the logic is replicable.

Second, do not conflate platform endorsement with due diligence. The ING referral model is fine as far as it goes, but it goes less far than it appears. Any institution lending its brand to a crowdfunding platform needs robust ongoing oversight of that platform’s underwriting standards, not simply an initial commercial assessment.

Third, take ECSPR compliance seriously as a filter. The regulatory framework now gives you a minimum bar for counterparty credibility. Platforms operating outside it — or that have failed to obtain a licence — carry platform risk that is, in my view, unacceptable for institutional partnerships.

Fourth — and I say this having watched more than a few boardrooms nod enthusiastically at the innovation case whilst quietly hoping the whole thing would go away — make a decision. The cost of indefinite review is not neutral. Clients are already accessing these structures through other channels. The question is not whether your clients will invest in crowdfunding; it is whether they will do so with your guidance or without it.

The bottom line

Crowdfunding in its European, post-ECSPR form is not a fringe product. It is a maturing asset class with a credible return profile, a manageable risk framework, and a growing body of institutional infrastructure. The headline names — Funding Circle, Crowdcube, GoParity — proved the model could work. The bank partnerships emerging across Spain, the Netherlands, and Portugal are showing what it can become.

For financial services leaders, the relevant question is no longer “is this real?” It is “what is our position?” Organisations that answer that question deliberately, with clear parameters and appropriate governance, will be better placed than those that are still debating the premise when the market moves on.

The crowd, as it turns out, has rather good judgement. It would be a shame not to work with it.