News

An identity crisis? Crowd finance vs crowdfunding

January 30, 2017 • By TAB team

“Crowdfunding” is everywhere. It’s a term used by market participants, media commentators and regulators like the EU and the FCA. It’s even in the Oxford Dictionary…

“Crowdfunding” is everywhere.

It’s a term used by market participants, media commentators and regulators like the EU and the FCA. It’s even in the Oxford Dictionary…

Credit: oxforddictionaries.com

But “crowdfunding” doesn’t distinguish between the diverse range of fundraising activities engaged in by the crowd. Donations-based, rewards-based, equity-based and of course, debt-based… They’re all different, so why do people refer to them with the same word?

When we speak to platforms, especially offering P2P lending, we find many would never dream of using the term crowdfunding, as the term is strongly associated with charity and rewards, and in fact are even turning away from P2P, in favour of "marketplace lending". There's a usage difference between countries too - crowdfunding in the US is mostly rewards, but in Europe, more skewed towards equity.

“Alternative finance” is not a particularly helpful term either, since it expresses a broad collection of technologies and ideas, including cryptocurrencies, insurance technologies and payment services. At Crowdsurfer, we prefer the term “crowd finance”. We feel it encapsulates the wealth of different fundraising activities that we monitor, is a flexible term and one that avoids confusion. We dabbled with "collaborative finance", which actually felt much the more accurate term, but the "crowd" is so engrained, we compromised!

Crowd finance is a diverse, fast-evolving sector, and terminology will continue evolve. Our industry is important enough to deserve a language of its own, but there is no fixed lexicon… yet. This will change as the market grows, and we know we hold a responsibility in shaping the terminology around it, be it known as marketplace, crowd or something else!

In the meantime, we’re interested in hearing what you think. How do you describe the industry? Drop us a line via Twitter and we’ll share with our community.