Like marketplaces, crowdfunding platforms have been enjoying a meteoric rise in popularity over the past few months. In 2021, no less than 1.88 billion euros were raised, an increase of 84% on the previous year (figures from Mazars and Financement Participatif France (FPF)).
At the heart of a crowdfunding platform’s performance lies the proper orchestration of the financial transactions that pass through it. From raising funds from investors to distributing them to project promoters, and including the management of payments, reimbursements and ring-fencing, the platform must guarantee control and security for all stakeholders.
Discover 5 tips for organizing your crowdfunding platform’s flow management.
Tip 1: Identify all flow types
On participative investment platforms, multiple flows circulate, which need to be identified in order to control them as effectively as possible. There are several types :
- Contributors ‘ payments, which are the funds collected during crowdfunding campaigns, via various payment methods (cards, transfers, wallets, etc.);
- Transfers of funds restricted to project holders, which can be made once crowdfunding campaigns have reached their objective and management and transaction fees have been deducted ;
- Refunds to contributors, which may be necessary in cases where campaigns fail to meet their funding targets, or if incidents occur during the implementation of projects ;
- Management and transaction fees associated with the platform, which may include platform fees, payment fees, and project and contributor verification fees (KYC / KYB).
Tip 2: Define the rules
Once identified, transparent and standardized rules can be put in place to secure transaction flows, taking into account the different laws and regulations that may apply to each of them. These rules may concern several elements, such as :
- The conditions for raising funds on the crowdfunding platform (campaign duration, minimum and maximum funding amounts, repayment terms, etc.) ;
- Management and transaction fees associated with the platform, their calculation and method of collection ;
- Protocols for managing payments, refunds and other financial flows associated with the platform;
- Project and contributor verification procedures to ensure the legality and reliability of participatory investment campaigns.
Tip 3: Anticipate to reduce risks
As with any type of investment, equity crowdfunding can carry its share of risks, which obviously depend on a number of factors, both external and internal to the platform. To anticipate and reduce these risks, the crowdfunding platform must establish various procedures, ensuring that contributors are protected and that the platform’s interests are safeguarded :
- Protocols for intervening and resolving incidents or disputes in a fair and equitable manner ;
- Measures to protect the funds collected, such as segregated accounts to separate contributors’ funds from the platform’s funds;
- Insurance to cover financial risks related to incidents or disputes, to protect the interests of contributors and the participatory financing platform ;
- Transparency and communication policies to inform contributors of incidents or disputes that arise, and to explain how they will be handled.
Tip 4: Build strong relationships with your users
A crowdfunding platform needs to build solid relationships with project owners and investors, based on listening, exchange and support. A variety of transaction-related issues may require assistance, and must therefore be handled quickly and professionally. This may involve solving technical problems, providing information/instructions, preventing fraud or payment errors, for example.
Ultimately, offering quality customer support improves the platform’s user experience, contributes to stakeholder loyalty and engagement, and ultimately increases the volume of flows on participatory investment campaigns.
Tip 5: Surround yourself with a reliable, experienced payment partner
The choice of a payment service provider to support platforms in the management of their flows is crucial. Indeed, it is the central coordinator of their activity. PSPs specialize in organizing payment flows on commercial and financial platforms. Thanks to their security accreditations, they guarantee the reliability and tracking of incoming and outgoing transactions, the segregation of funds, the opening of merchant accounts and the protection of sensitive data.
An efficient flow management system, adapted to the specific needs of crowdfunding platforms, brings agility and control to the management of projects, contributors and counterparties, as well as to the user experience, payment functionalities and security.