Crowdfunding may well be about to get a lot of attention. As a concept, the idea of funding a business venture from the ground up through small investors is nothing new to credit unions. In fact, it could be argued that, in broad strokes, credit unions were the original crowdfunding model. Recently more credit unions have been trying to leverage the local business market. But in recent years, websites such as Kickstarter and have been gaining popularity, as well as a good deal of press for their efforts. And with the JOBS act, passed by Congress in a rare show of bipartisanship and signed into law this month, those sites and others like them are likely to attract droves of customers.

The new law raises a long-standing restriction on accepting venture capital funding from... well, from regular people. Until now, investing in startups at the ground level has been the purview of the very wealthy, the idea being that venture capital is such a risky business that only high net-worth investors had the savvy to invest without being taken advantage of. But the recession and potential for job-creation has convinced lawmakers that opening up new avenues of funding for small businesses is a risk worth taking.

Credit unions, though aligned in many ways with the philosophy and strategy of these investment groups, are not yet a part of this emerging movement. Crowdfunding is largely looked upon as a brand new invention of the youthful, idealistic, and entrepreneurial new class of online twenty-somethings. Excited articles abound, extolling the virtues of this new approach to community investment in a free market.

The lesson here is that credit unions would do well to start paying attention - and would do better to start actively addressing this largely online marketplace. Younger customers live there. And unless credit unions speak their language and become a part of this conversation, they'll miss out on their business.

Here are a few reasons why credit unions should address this market more aggressively:

  1. Competitive advantage over big banks. Big banks are suffering from a major trust deficit. Although unlikely to adopt a crowdfunding model, credit unions can further gain the trust, and the business, of a generation by being sympathetic - in a way banks just cannot.
  2. Crowdfunding can support local business development. Many credit unions are placing a greater focus on supporting local business. Being engaged in the crowdfunding movement could help credit unions better execute on that goal.
  3. Crowdfunding will get the attention of younger customers. Young people are already likely to be familiar with the crowdfunding model because of websites like Kickstarter and If their local credit union is sympathetic, and vocal, they will notice.
  4. Crowdfunding fits the credit union brand. Credit unions are member-owned. Likewise, the small businesses that benefit from crowdfunding will have hundreds of individual shareholders with a stake in the business. Helping to facilitate crowdfunding will build on and support a credit union's community-based, bottom-up, member-driven brand.

As new online financial markets get congressional support, media attention and the interest of an entire demographic population, credit unions interested in their future success should pay attention, too.

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