Protecting Consumers in the Donation Crowdfunding Market

On Monday, Smithsonian published an article projecting that transparency issues in the donation crowdfunding market will eventually lead to “a big, public fallout” as donors who have been duped into contributing to misleading tech campaigns begin to hold platforms responsible.

Crowdfunding, the article claims, is “a ticking time bomb.”

What the article doesn’t tell you, however, is that many organizations have been working to  mitigate the risk that donors face when they participate in crowdfunding.

BancBox LogoCompanies like Bancbox and CrowdCheck are already providing transaction and evaluation services for both funders and organizations, doing the due diligence to verify that offerings are not misleading in any way. As the products and services offered via crowdfunding become increasingly technical, these companies take much of the burden of identifying illegitimate offerings off of the donor by providing third-party verification.

Many of the developments that have already occurred have been centered on the equity crowdfunding market — where the risk to investors is far greater than in the more traditional donation or rewards-based segments of the industry — but, as the Smithsonian article points out, the technology is just as relevant to these more traditional markets.

At the end of the day, crowdfunding remains the most transparent way to raise funds. The evaluations and consumer protections might be lagging slightly behind the market — as they would in any emerging industry — but these issues are little more than growing pains that will be worked out as the industry continues to grow.

Consider this a projection for the future: crowdfunding will only become more secure and consumer-friendly going forward. There is simply too much money being exchanged for the market not to maneuver to weed out the legitimate offerings from the scams, as it is already developing the capability to do.

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