Impact of Crowdfunding on the established Banking and Finance Industry Assessment Answers

Impact of Crowdfunding on the established Banking and Finance Industry
AbstractCrowdfunding is one of the useful sources for making economic development in the country. Most of the developing countries are making effective monetary and fiscal policies in order to increase the loan growth rate of the country. In this paper, there is a brief description of how the crowdfunding technique impacts the growth rate of the banking and finance industry in developing countries. For that purpose, five emerging countries are selected for the quantitative analysis like Italy, Poland, Austria, Spain and Germany.
The financial data of their banks return on equity and crowdfunding rate is collected from the official websites of the World Trade Organization (WTO), World Bank, the Crowdfunding websites and their banks annual report. In order to collect the quantitative data, three commercial banks of each emerging country are selected and time duration from 2014-2017 is considered as the time duration for estimation. All the data is based in the form of numerical figures, and the regression method is used in the analysis of the impact of the crowdfunding on the development sector of the banking industry. After critically analyzing the impact, it is concluded that there is a direct relationship between the crowdfunding and banking industry of the emerged economy. This paper is informative regarding the importance of crowdfunding in the economic development of the country.
ContentsTOC z o 1-3 u hAbstract PAGEREF _Toc3749876 h 2Contents PAGEREF _Toc3749877 h 31.Introduction PAGEREF _Toc3749878 h 32.Literature Review PAGEREF _Toc3749879 h 53.Research Methodology PAGEREF _Toc3749880 h 104.Result analysis PAGEREF _Toc3749881 h 135.Conclusion PAGEREF _Toc3749882 h 226.Recommendation for future work PAGEREF _Toc3749883 h 237.References PAGEREF _Toc3749884 h 248.Appendix PAGEREF _Toc3749885 h 26
Introduction Crowdfunding is one of the effective funding processes in which the amount of money raises through the contribution of different people paying up a small share into a larger pool by using internet sources. It is considered as the most straightforward way in front of the business, people and charities to raise the money by motivating a general public to invest a specific amount of money in the business project and earn a specific reward and profit. This mode of financing is less risky as compared to the other financing and investing activity. Crowdfunding is considered as one of the significant assets in front of the financial institution to enhance the number of customer, entrepreneur and investor and also plays an integral part in the active circulation of money within the banks deposits that positively impact the profitability and sustainability of the banking sector of a country. It is evident that if the banks are healthy, then the economy of the country also becomes strong because all the fiscal and monetary policies, devaluation and valuation of currency, interest rate, exchange rate and other such financial transactions are based on the effective banking sector CITATION Bel18 l 1033 (Belleflamme, Lambert, amp Schwienbacher, 2018).
Crowdfunding has a long history which started when the financial sector creates war bonds in order to initiate military conflict. There are majorly two types of crowdfunding named as Reward crowdfunding and Equity Crowdfunding. In the reward crowdfunding, entrepreneurs pre-sell a service and product in order to launch a business concept without the scarifying shares/ equity or incurring debt. In the second one, equity crowdfunding helps the banker to receive the share of a company in exchange for money pledged. Among these two factors, there are mainly four ways of conducting the financial transaction named as reward-based crowdsourcing, equity-based crowdsourcing, and donation-based crowdsourcing and debt based crowdsourcing. This crowdfunding plays a vital part to enhance the economic development of the country and also develop the economic stability of different projects. Most of the developed finance and banking industry is using online banking in their financial and transaction activities. This type of equity crowdfunding now becomes legal in the United States and most of its financial institutions use the Blockchain technology in the financial transactions where they use the online media to motivate the people to invest in different profitable projects and in turn giving them a profit margin on the basis of the amount which they invest in a new projectCITATION Lan17 l 1033 (Langley amp Leyshon, 2017). This type of financing is easy to adopt and for starting a business because to provide an easy way to contact with a large number of customers and investors all over the world within a minimum period and low-cost margin.
Research question
How crowdfunding positively impact the loan growth rate of the banking industry in the emerging country
Literature ReviewIn the banking and financial industry, there is a continuous development of the practical activities and infrastructure in the banking transaction all over the world that directly impact the productivity factor of the financial institution. There are many types of researches undertaken by several economies and researchers regarding the effective adoption of the crowdfunding banking tool in the current baking system where there is a continuous development of the technology daily, and a have competition in the market. Now the world becomes a global village where there are no boundaries among people, countries and business. There is a considerable number of opportunities before the financial constitution to invest in the international market and earn a large amount of profit CITATION Br16 l 1033(Brntje amp Gajda, 2016). In the current era, there are new financing alternatives like peer-to-peer lending, crowdfunding and microfinance, continuously expanding. Garry Bruton with others (2015) majorly investigates the consequences and antecedents factor of these financing mechanisms. They majorly studied in the particular issues that are generated after the academic foundation of new financial options that helps the entrepreneur to start a new business and grow its ventures. The systematic approach is used in order to understand the emerging technological impact on entrepreneurial finance and business CITATION Bru15 l 1033(Bruton, Khavul, Siegel, amp Wright, 2015).
Internet plays an essential part in the online banking industry because all the transactions either within or outside the country are made through a blockchain that enhances the productivity and development of the banking industry. Armin Schwienbacher (2017) explores the relationship of the internet in the crowdfunding sector of the banking industry, as it is a broad topic in the current era where there is a continuous development in the technology. Most of the commercial banks are using crowdfunding techniques in loaning activities and result in the enhancement of performing loans. He majorly emphasized on the network effect, the internet and the horizontalization of an organization, in which he discussed how the social media plays an essential part in the effective communication standards and how this horizontalization majorly impacts the market structure of the commercial banking industry. In this case, crowdfunding also knew to be peer-to-peer financing plays a significant role in the development of this finance industry. In the current era, most of the banking institutions all over the world are shifting their traditional mode of financing to an online banking system CITATION Sch16 l 1033(Schwienbacher, 2016).
There are various kinds of crowdfunding in the banking industry that enhance the performance and productivity level of the financial institution. As the crowdfunding majorly enhance the financial state and money with the minimum cost so, in its implication, a networking capability of the software and internet platform is generated where a large number of the audience can easily communicate with the banking sectorCITATION Men16 l 1033 (Mendes-Da-Silva, Rossoni, Conte, Gattaz, amp Francisco, 2016). This article majorly emphasized how capitalization becomes a secure mode of raising profit in the current era. Most of the policymakers, advocates and practitioners think that this crowdfunding is a democratizing, disruptive and alternative qualities that make a novel and digitally rendered commercial space which is creating some challenges in the establishment of funding practices in capital and banking market. The researchers analyzed that the venture capital network is offering an egalitarian and open source of capital for social, economic and cultural entrepreneurship. Paul Langley and Andrew Leyshon majorly explore the concept of ecologies from the geographies of finance and money literature. They conducted a financial analysis of the proliferative and diverse financial and monetary dorms and generated a concept that the alternative/ capitalist ecologies are formed and differentiated between the various crowdfunding ecologies CITATION Lan17 l 1033(Langley amp Leyshon, 2017).
In the current era, crowdfunding is continuously gaining attention in different practices and theories. There are various platforms created that have emerged and offer different entrepreneurial projects to the financial institutions and companies and employ different changes in order to raise the money from an undefined group of online users. This article of the crowdfunding majorly emphasized the more in-depth understanding of the rise and development of the crowdfunding as an alternative funding opportunity. There are different characteristics of the crowdfunding like market development, its field of application, different classification approaches and also providing the direction towards the future projects CITATION Gie16 l 1033(Gierczak, Bretschneider, Haas, amp Leimeister, 2016).
In most of the countries, crowdfunding plays a vital role in the economic development of the country. There are many emerging literature regarding the impact of crowdfunding on the banking sector. In Italy, most of the financial institutions are effectively adopting crowdfunding in financial institutions. This research is based on the shortage, socio-economic, analyzing geographical characteristics of the crowd funders. This technology helps to influence the social and geography contacts in a new venture CITATION Bro18 l 1033(Brown, Mawson, Rowe, amp Mason, 2018). Italy is suffering a massive economic crisis, and in front of its policymaker, there is a need for strong dynamism in crowdfunding. The micro-economic model is critically discussed in this research analysis, and at the end, it is concluded that social media plays an important part in the crowdfunding process. Different countries have different cultural and economic factors that help them to adopt crowdfunding in financing activities CITATION Gue16 l 1033(Guerzoni, Peirone, Pais, amp Miglietta, 2016).
Crowdfunding majorly plays an integral part in the raising profit and revenue with the minimum cost. Most of the investors in the international finance market are striving for profit, but besides, social responsibility also lies on them. They are only interested in earning a large amount of profit that supports their local community. They also donate their money for the social benefits and this crowdfunding provides them with an adequate source of financing in order to achieve the social goals. This type of financing is beneficial for the investor due to its low-interest rate in order to finance the civic projects. Most of the banks are earning a profit from such funding activity CITATION Kir16 l 1033(Kirilova, 2016).
In the banking industry, most of the disruptive innovation comes into play that enables the exploitation of the market segments. The crowdfunding is the base of the modules that incumbents struggle in order to utilize this new online phenomenon in the banking industry. This design research module unable a banking institution to effectively utilize the crowdfunding in the financing, operating, and investing activities of the bank. Ten primary crowdfunding services are interlinked with an ecosystem, and the expected contribution enhance the utilization of the crowdfunding services in service ecosystem of traditional industryCITATION Haa15 l 1033 (Haas, Blohm, Peters, amp Leimeister, 2015). Many researchers expertly designed attractive crowdfunding services and received a competitive advantage.
In the developed country like the United States and the United Kingdom, their banking industry is continuously adopting an innovative mode of financing, operating and investing activities. In the current era, most of the financial transactions occur in the form of crowdfunding and blockchain. The reason is that it is an entirely natural and cost-effective method to transfer money within a short period. A large number of the small and medium enterprise. SMEs in a larger number are actively working in the UK and the US economy that positively impacts the economic development of the country. Approximately 49 or fewer employees are having a 40percent turnover ratio in the United Kingdom and have a 45 per cent total employment rate. This figures us continuously increasing. All this is occurred due to the adoption of crowdfunding technology in the operating activities of the banking and finance industry CITATION Rid15 l 1033(Ridley, 2015).
There are two major contributors to the promotion of new entrepreneurial finance factor in the equity crowdfunding. First one is to compare its regulation in the world market and explore how this factor impacts the development of the market. The second one is to investigate the significant role of external investors towards social capital and equity retention. Silvio Vismara (2016) majorly work on the importance of social network on the equity retention of the country. After making the critical analysis, it is concluded that venture capital and initial public offering are the non-equity crowdfunding that enhances the economic status of the country. In this way, due to adopting the crowdfunding, the lending marketing of the emerging countries are positively affected CITATION Vis16 l 1033(Vismara, 2016).
Most of the emerging countries are using crowdfunding in the banking transaction in order to boost the economic and social perspective of a country. Most of the emerging European and other Asian countries are making different strategies in the adoption of the crowdfunding in their banking and lending industry that positively impact the growth rate of the country. Most of the fiscal and monetary policies of these emerging countries are based on the per capita income and spending pattern of each citizen of the state CITATION Haa15 l 1033(Haas, Blohm, Peters, amp Leimeister, 2015).
The crowdfunding positively impacts the interest rate of the loaning sector in favour of the customers like the interest rate of the loan products become lower that attract a large number of the customer to purchase the loan products or invest in some investment projects and get the appropriate outcome. This factor positively impacts the risk of the non-performing loan in the lending market, and the working of the banking industry will move in the appropriate way. The situation will be opposite in the absence of the crowdfunding. It is because that in that case, the interest rate of the loaning among will much higher that de-motivate the customers to get loan or invest in some projects and in this way, the economy of the country become collapse due to minimum circulation of money CITATION Blo18 l 1033 (Block, Colombo, Cumming, amp Vismara, 2018).
Research MethodologyCrowdfunding is one of the most critical topics in the current era where there is continuous development in technology. This paper is informative regarding the critical analysis of crowdfunding impact on the latest commercial banking and financing activity. For that purpose, a quantitative analysis method will use in order to examine this cause-effect relationship. This quantitative method will emphasize statistical, mathematical and objective measurement of the collected data through different questionnaires, standards and survey. This method is considered as one of the useful data collection methods because due to this an efficient computation of the data is performed, and the accurate data analysis will be made at the end of the research. As this is the most diversified topic in the worldwide lending market of banking industry so there is a need to collect the generalized data from the different participants that will enhance the acceptability factor of this research.
In this quantitative research, numerical data will be used, and from this, the descriptive analysis will perform. The numerical data is helpful in order to statistically analyze the impact of crowdfunding on the loan growth rate of the banking industry in the emerging countries. For that purpose, a secondary source of data collection is also used in order to analyze these two factors critically. In order to collect the secondary data, different official international websites will be used where all the financial data like the loan growth rate of the banking industry and the crowdfunding growth rate. Different websites like the World Trade Organization (WTO), World Bank, annual reports and the crowdfunding websites will be used in order to critically analyze the impact of this new funding technique on the finance industries. The primary reason to select these websites is that all the relevant and reliable information regarding the selected emerging countries is readily available.
For the critical analyses, five countries will be selected for having an emerging economy. These countries are Italy, Poland, Austria, Spain and Germany and three banks of each country will be selected. Like from Austria, BAWAG P.S.K, Erste Group Bank and RZB Group are selected, from Poland Bank Millennium, BZ WBK and JP Morgan Chase Bank, from Spain Banca March, Banco Atlantico, Bankinter, from Italy Banco Nazionale Bancaria Italiana, Mediobanca and Banco Sella and from Germany DZ Bank Group, Wirecard Bank and Bremer Bank are selected in order to collect the data of performing and non-performing loan of the commercial banking sector of a country CITATION Hop171 l 1033 (Hope amp Vyas, 2017). The loan growth rate of these banks from 2014 to 2017 will also select. The reason for selecting these countries is that they are in the developing stage while employing the crowdfunding techniques in the banking industries as compared to the developed countries and it is an effective way to study the impact of the crowdfunding on the economic development of the country. Hence, all the relevant information regarding their loaning growth rate in the form of enhanced performing loan will be collected from the official websites.
In the critical analysis, a regression method is used where all the statistical data of all the selected countries are critically analyzed, evaluate and conclude by making an adequate comparison with the standards of the regression. In this analysis, all the pros, cons and other related factors are critically discussed, analyze, evaluate and conclude in order to derive an accurate outcome. Five steps will be used in order to critically analyze the impact of the new crowdfunding technique on the lending market of the commercial banking industry in the emerging/ growing countries. In this regression method analysis, firstly all the statistical data of the independent and dependent variables will enter in order to derive an accurate outcome.
In the step, linear regression will be used in order to understand the correlation between the independent and dependent variable. The probability of their correlation will critically analyse that derive the positive outcome in order to prove the hypothesis of the research. In this study, the regression analysis is an effective analyzing technique because it is useful for a categorical variable in simple random sampling. The following hypothesis will be made according to this analyzing method like
H1 Crowdfunding is directly proportional to the loan book portfolio of commercial banks
H2 Growth of the crowdfunding directly impact the interest rate of the commercial banks
Independent variable Crowdfunding
Dependent variable the loan growth rate of the commercial banking industry (performing loan)
351472557785Dependent Variable
A loan growth rate of bank and finance industry(Performing loans)
0Dependent Variable
A loan growth rate of bank and finance industry(Performing loans)
1079543815Independent Variable
Crowdfunding
Independent Variable
Crowdfunding

183959527305
Result analysisIn this analysis, a linear regression is used in order to analyse the correlation between the crowdfunding and loan growth rate, which have the following equation,

Discussion regarding results depends on five situations in which the relationship of the dependent variable and independent variable being discussed. In the research analysis, a regression analysis is used to measure crowdfundings impact on the loan growth rate of the banking industry. The sections are given below,
Model Summary
Model R R Square Adjusted R Square Std. The error of the Estimate Durbin-Watson
1 .021a .000 -.499 2.32740 1.944
a. Predictors (Constant), iv
b. Dependent Variable DV
The above table shows the correlation between the independent variable and dependent variable where the goal is the same that enhance the profitability in the loaning sector of the banking industry in the selected emerging countries. In this correlation, the estimated standards error of the estimate is above than zero value that is 2.32740 and adjusted amount to resolve the error factor in this correlation is in the negative range like _0.499. The level of the regression between them is 0.21, and its double square value shows the 0 value. It means that there is a direct correlation between both the variables.
ANOVAa
Model Sum of Squares df Mean Square F Sig.
1 Regression .005 1 .005 .001 .979b
Residual 10.834 2 5.417 Total 10.838 3 a. Dependent Variable DV
b. Predictors (Constant), iv
In the above ANOVA table, the value of the residual value is much higher than the regression level. It shows that the result outcomes are not very much to meet the actual value. There is a little bit of linear regression among the variables. The frequency of their resemblance is only 0.001 it shows that they are somehow resemblance but the crowdfunding not majorly impact the loan growth rate of the commercial banking sector. In the above figure, the independent variable remains constant while the dependent variable is changing with time to time and when the independent variable remains constant then there is a little impact on the dependent variable.
Coefficientsa
Model Unstandardized Coefficients Standardized Coefficients t Sig.
B Std. Error Beta 1 (Constant) 9.667 3.362 2.875 .103
iv .003 .101 .021 .029 .979
a. Dependent Variable DV
In this coefficient table, the standards deviation value of their correlations is higher in the constant independent variable as compared to the independent variable. It shows that all the performance is based on the activity of the independent variable which is a crowdfunding variable. it is because that in the banking industry all the performance of the loaning sector is based on the activity working of the crowdfunding approach in the working environment.

The above figure shows that the frequency of the impact of the crowdfunding (independent variable) on the loan growth rate (dependent variable) is at a moderate rate. Like its higher peak value of the impact and dependency is 1.0 and its least value is 0.1, so the correlation between both variables is lie from 0.1-1.0. This shows the positive sign of their positive correlation sign between them. There are many factors behind the positive correlation between the positive correlations between them like the growth rate of the performing loan is continuously increasing within the year of 2014-2017. While on the other hand, the non-performing loan of the commercial banks of the emerging economies are continuously decreasing that shows the frequency of the positive correlation between them.
The major impact of the crowdfunding is on the interest rate of the commercial banking sector of the selected countries. The reason is that due to this crowdfunding technique, the interest rate of the loaning activities of the commercial banking industries to the customers and banks are lower that attract more people to invest and earned a large amount of return. This activities increase the circulation of the money and provide more opportunity to earn a profit. Also, the rise of the non-performing loan factor is also reduced.
The most investor will be motivated to purchase the loan products of the commercial banking sector due to their lower and affordable interest rate. This shows that the increase in the crowdfunding procedure in the banking sector then the interest rate of the banks will become decreases which attract more people to invest in different profit oriented project. It decreases the risk of loss factor in the non-performing loans and in this way this growth rate in the loaning industry positively impact the economic stability of the country.

The above figure shows that dependent variable which is the loan growth rate of the commercial banking industry is affected by the crowdfunding technique. It shows that there is an appropriate regression occurred in this research analysis. In the beginning, the correlation values are quite closer to the expected cum probe it means that their rate of dependence is must higher. But the difference from one point to another is so much high it shows that the crowdfunding do not majorly impact the loaning performance in some loaning market and this second point is also far from the mean line of the expected outcome. In the third point, the correlated values show the positively signed and completely lie on the expected outcome. This is the actual mean position of the higher loan growth rate of the banking industry in the national market. The last point is then again moved away from the mean line of expected outcomes. It shows that there is a little bit correlation between the independent and dependent variable CITATION Com19 l 1033 (Complete Dissertation, 2019). When these all correlations values are considered then it comes to analyze that the probability of the direct and positive correlation between them.
In the selected countries like in Austria, the performing loan rate in the commercial banking industry is continuously growing within the range of 89 to 98. In Poland, their performing loan productivity in commercial banking is between the frequencies of 78 to 94. In Spain, performing loan activities are increasing within the range of 91 to 97. In Italy, there is also the same higher performing loan factor like between 87 to 95 and in Germany, the growth rate of the performing loan is from 90 to 99. While on the other hand, the non-performing loan sector of all the selected commercial banks in these countries is continuously reducing within the range of 0.1 -10.4. all these changes are occurred due to adopting crowdfunding technique.
ConclusionThus after critically analyze the numerical data, it is concluded that most of the economic developments of Italy, Spain, Germany, Austria and Poland, are based on the finance and banking industry. The crowdfunding technique positively enhanced the loan growth rate of the banking industry in the emerging country by continuously enhancing the productivity of the performance loan in the money circulation. In addition, the interest rate of the loan is also reduced due to favourably apply the crowdfunding technique. The economy of the developing country is boosting up due to the implementation of the crowdfunding in lending and financing market.
Recommendation for future workThere are some recommendation regarding the future researches that
There is a need to analyze the technological impact also on the banking industry critically.
There is a need to consider the latest data of 2018 regarding this topic.
There is a need to collect data from the Asian banking industry.
There is a need to conduct primary research to analyze the people views regarding this research.
ReferencesBIBLIOGRAPHYBelleflamme, P., Lambert, T., amp Schwienbacher, A. (2018). Network Effects in Crowdfunding. Available at SSRN 3259191.
Block, J. H., Colombo, M. G., Cumming, D. J., amp Vismara, S. (2018). The growth of crowd funding impacting interest rates of commercial banks. Small Business Economics, 50(2), 239-250.
Brown, R., Mawson, S., Rowe, A., amp Mason, C. (2018). Working the crowd Improvisational entrepreneurship and equity crowdfunding in nascent entrepreneurial ventures. International Small Business Journal, 36(2), 169-193.
Brntje, D., amp Gajda, O. (2016). Crowdfunding in Europe. State of the Art in Theory and Practice.
Bruton, G., Khavul, S., Siegel, D., amp Wright, M. (2015) . New financial alternatives in seeding entrepreneurship Microfinance, crowdfunding, and peertopeer innovations. Entrepreneurship Theory and Practice, 39(1), 9-26.
Complete Dissertation. (2019). Assumptions of Linear Regression. Retrieved from Statistical Solution https//www.statisticssolutions.com/assumptions-of-linear-regression/
Gierczak, M. M., Bretschneider, U., Haas, P. B., amp Leimeister, J. M. (2016). Crowdfunding Outlining the new era of fundraising. In Crowdfunding in Europe (pp. 7-23). Springer, Cham.
Guerzoni, M., Peirone, D., Pais, I., amp Miglietta, A. (2016). The Emerging Crowdfunding Market in Italy Are the Crowd Friends of Mine In Crowdfunding in Europe (pp. 87-96). Springer, Cham.
Haas, P., Blohm, I., Peters, C., amp Leimeister, J. M. (2015). Modularization of Crowdfunding ServicesDesigning Disruptive Innovations in the Banking Industry. aisel.aisnet.org.
Hope, O. K., amp Vyas, D. (2017). Private company finance and financial reporting. Accounting and Business Research, 47(5), 506-537.
Kirilova, P. K. (2016). Impact of Debt Crowdfunding for Civic Projects on the Optimal Portfolio of a Socially Responsible Investor. In Crowdfunding in Europe (pp. 167-173). Springer, Cham.
Langley, P., amp Leyshon, A. (2017). Capitalizing on the crowd The monetary and financial ecologies of crowdfunding. Environment and Planning A, 49(5), 1019-1039.
Mendes-Da-Silva, W., Rossoni, L., Conte, B. S., Gattaz, C. C., amp Francisco, E. R. (2016). The impacts of fundraising periods and geographic distance on financing music production via crowdfunding in Brazil. Journal of Cultural Economics, 40(1), 75-99.
Ridley, D. (2015). Will New Regulation on Crowdfunding in the United Kingdom and United States Have a Positive Impact and Lead to Crowdfunding Becoming an Established Financing Technique Statute Law Review, 37(1), 57-76.
Schwienbacher, A. (2016). The internet, crowdfunding and the banking industry. In The Palgrave Handbook of European Banking (pp. 213-229). Palgrave Macmillan, London.
Vismara, S. (2016). There is a two major contribution on the promotion of new entrepreneual finance factor I the equity crowdfunding. Small Business Economics, 46(4), 579-590.

AppendixRegression
Model Summaryb
Model R R Square Adjusted R Square Std. Error of the Estimate Durbin-Watson
1 .021a .000 -.499 2.32740 1.944
a. Predictors (Constant), iv
b. Dependent Variable DV
ANOVAa
Model Sum of Squares df Mean Square F Sig.
1 Regression .005 1 .005 .001 .979b
Residual 10.834 2 5.417 Total 10.838 3 a. Dependent Variable DV
b. Predictors (Constant), iv
Coefficientsa
Model Unstandardized Coefficients Standardized Coefficients t Sig.
B Std. Error Beta 1 (Constant) 9.667 3.362 2.875 .103
iv .003 .101 .021 .029 .979
a. Dependent Variable DV

 

Looking For Complete Assignment Sample Get It On WhatsApp