Crowdfunding democracy - what the Greek crisis tells us about the new financial order

People are willing to bypass the traditional financial system and come together to embrace a new type of finance. In the post-crisis environment, institutions are being challenged, mistrusted and in some cases, overlooked. A new approach to finance –an approach driven that is transparent, personal and purposeful-is emerging, giving rise to a host of start ups focussed on a consumer increasingly used to real time information and instant gratification.

One sobering statistic is the fact that 33 per cent of Millennials do not believe they will need a bank by 2020. While this seems unlikely, it is clear is that the banks of 2020 will need to look very different than they do today.

Knowledge is power

With new tools and services at hand, knowledge can now be acquired on-demand and effortlessly upgraded when obsolete. New platforms are helping consumers in their journey towards independence, enabling anyone with Internet access to become their own fitness trainer or doctor.

When it comes to the world of finance, new players are tapping into this changing consumer behaviour and are driving an era of innovation in financial services. Through a combination of smart visualisation techniques, gamification and relevant social context, new financial players are radically changing the way the industry operates.

New platforms like Nutmeg, Venmo or Robinhood are aligning their brand experience with consumers’ digital expectations and allowing greater transparency and ease of use. These players are successfully empowering users with the tools and advice to make not just independent but also smarter financial decisions.

By delivering trackable, connected and seamless experiences (similar to ones you would expect when using Uber, AirBnb or FitBit), these challenger financial brands have managed to profoundly alter the financial status quo.

Money is mobile

A number of new technologies are coming together to make peer 2 peer payment as effortless as a text or an email. Take Venmo, for example. Owned by PayPal, Venmo is a peer-2- peer payment app with a simple premise: connect it to your checking account to be able to send and receive payments in only a matter of taps and swipes. The app has become so popular that it has even achieved verb status (‘I've got this’ someone will say to their friends ‘just Venmo me’) and has moved mobile payments towards the mainstream (Forrester Research estimates that the amount of money spent by Americans via mobile payments will reach $90bn in 2017, compared with $12.8bn two years ago).

In an attempt to keep up with consumer trends and leverage social to drive engagement levels, social media platforms are also entering the field and developing m-commerce and m-payment strategies.

For instance, in 2014, the messaging app Snapchat partnered with the payments firm Square to allow users to send money to friends. ‘Snapcash’ allows people to enter their debit card payment information securely and message their friends a dollar amount to be directly deposited into the recipient’s bank account. This June, Facebook announced they were rolling out their new payments feature in the U.S allowing you to make payments to your friends by adding your debit card through Facebook Messenger in just a few taps.

Apple has been brilliant at crafting a new positioning in the growing alternative payments market, working with partners, including existing players (banks, retailers and card schemes) to deliver an experience to consumers and retailers that is familiar and intuitive (and yet perceived to be innovative).

Investing is purposeful

As the attempted Greek bailout highlighted, crowdfunding and Peer-2-Peer lending are empowering networks of people to finance the creation of new products, services and ideas. Players like Crowdcube, Zopa or Seedrs are making finance more human, simple and purposeful. No longer are users invited to invest in obscure products and intangible futures, but in real people, projects and passions.

In fact, alternative finance has developed from being a mere digital quirk to a powerful tool. According to Goldman Sachs, crowdfunding rose to roughly $10bn in 2014 from $1.5bn in 2011.

London start-up WeSwap is even using peer-to-peer connections to disrupt the currency exchange market by matching travellers in one country with those in another who need to exchange currency.

The interesting thing of peer-to-peer payments in this space is that it cuts out the middle person and hence is able to provide a better exchange rate (WeSwap is free to use if customers sign up and swap with people they already know). Similar to Venmo or Zopa, WeSwap is making money transfers simple, accessible and transparent transactions.

So what does this mean for the financial establishment?

A new era in finance is undoubtedly opening up, offering greater independence, transparency and personalisation for the user. But if responses to the Greek crisis highlighted a new spirit of independence, it also revealed a certain naivety about the fundamentals of the economy.

For most of us, finance and economics still feel complex, intangible and distant. In a poll of more than 1,500 adults, around 60 per cent failed to offer the correct definition of GDP when given five choices. A quarter said they did not know.

Without real understanding, the new financial landscape can be a frightening place. The opportunity is there for established players to embrace the new spirit of transparency, simplicity and purpose while using their platform to educate and inform, building a generation that is both empowered and informed.

Carmen Ruiz Pozuelo is a strategist at digital agency Isobar. She tweets at @cruizpozuelo.