The past 12 months of pandemic lockdowns and disruption to business through a mass of people working from home has posed a myriad of financial issues across all industries. Apart from internal financial struggles, companies might also be finding it difficult to gather external financial data. This poses a huge problem for the financial field, as it is deeply involved in big data. Through predictive analyses, businesses can find solutions and create informative reports that are crucial in business planning. However, the disruption to regular work patterns has been a hindrance to data-gathering processes, primarily due to how it has upended the current economic climate. Luckily, there are means by which businesses can bridge the data gap and keep business rolling. One solution: crowdsourcing. Read on to learn how financial institutions can leverage crowdsourcing to improve operations.
Gathering Outsider Information
Crowdsourcing allows a company to gather ideas and insights from its customers, employees, and stakeholders. Customers can provide feedback and constructive criticism on products and services. Meanwhile, stakeholders and employees can lend a hand in risk mitigation by voicing their ideas during the product and service development stage. This provides companies with the opportunity to gain new perspectives on how to control risk while also maximizing returns.
Other companies and institutions utilize crowdsourcing to gather novel ideas from external parties. Some businesses communicate directly with clients, asking them what they want to see next from the company. Another option is to host a contest where individuals or organizations are prompted to send their ideas. The latter option seems to have recently grown in popularity.
Crowdsourcing allowed third parties to provide innovative solutions to many difficulties, including revenue disruption in the finance industry. Many of the challenges provided monetary prizes, garnering hundreds of different solutions from people based in different parts of the world, providing a range of different perspectives.
The CEO and co-founder of the prize challenge platform HeroX, Christain Cotichini, went on record saying:
“2020 brought with it once-in-a-century challenges, and we had millions of people at home and online, eager to make a difference. Governments, companies, and communities could turn to the HeroX crowd for cutting-edge solutions, safely tapping into a worldwide network of talent ……. COVID catalyzed crowdsourcing, and it is here to stay: we have seen that it is the most resilient and innovative means of problem solving out there.”
Generating Financial Forecasts
The widespread economic downturn has also made it difficult to accurately predict future financial trends. With a lack of substantial data, there will likely be more accounting estimates in financial statements. Even so, such reports must be built on accurate information, particularly in documenting disruptions, their effects on finances, and ongoing concerns.
Luckily, crowdsourcing can lend a hand in closing the financial data gap. By tapping into a larger network of individuals, one can gather valuable external data, such as trends in the local economy or global investment markets. Soliciting input from a huge group of respondents rather than from traditional sources can provide companies with more data, which they can use to pinpoint trends. This would enable them to make more accurate financial estimates.
The demand for experts who understand these numbers has grown because of the recession. To fill this gap, educational institutions have ramped up their finance programs, and online degrees with a business focus have been put under the spotlight. In particular, the subject of accounting, which is traditionally known as an on-campus degree, has been shifting to the digital sphere with the same validity as a traditional degree.
Although 100% coursework, online accounting degrees still prepare students for their certified public accountant exam as they are trained in micro- and macroeconomics, as well as the principles of marketing, management, and finance. This is great news for those who are crowdsourcing for experts as there is a much higher chance of finding someone qualified to generate financial forecasts. If you are looking for an expert, don’t discount online degrees as being inferior.
Funding a New Product or Service
A very particular way to utilize crowdsourcing is to have members of the public fund your company. This equity crowdfunding approach is different to reward-based crowdfunding on platforms such as Kickstarter and Indiegogo. On these platforms, innovators can launch new products. Popular examples include the Oculus VR headset, the Glowforge 3D laser printer, and the Fidget Cube desk toy.
Equity crowdfunding offers shares in an actual business, rather than ownership of products it makes. In the UK financial sector it has been used to raise early stage seed investment by startups that quickly achieved unicorn status, including Monzo and Revolut. After just two years, Revolut offered its early stage crowdfunding investors an opportunity to sell back their shares for a 19x ROI.
Regardless of which method is used, crowdfunding earns capital to launch a new product or service. Plenty of other startups have done this to debut their newest product offerings. If you launch a fintech business, you might have some success raising money from an online crowd of supporters. The US SEC recently eased equity crowdfunding regulations, and business owners can now raise up to $5m from the general public.
To close, crowdsourcing has so much potential for improving financial services, whether this is in the form of direct financial assistance or data-gathering. Both these aspects are crucial to a business’s development, especially now in the time of a global pandemic.
To learn more about crowdsourcing in this period of global disruption, check out our article on how enterprises are leveraging it in the new decade. There, we talk about our theme of unlocking human potential and put the spotlight on HeroX, the prize challenge platform.