Debt Based P2P Crowdfunding: Financial Product Credit Unions Need

This is my take on a new alternative financial product that the Credit Unions can utilize to differentiate themselves from mushrooming financial start-ups. Debt based peer-to-peer crowdfunding, an alternative financial product that I suggest will attract the millennials who need ‘re-purposed’ financial products.

Debt-based P2P Crowdfunding that not only bails clientele out of crises but also helps improve lives can be the ground-breaking new financial product that may disrupt the entire financial market. This utilitarian approach of the new product discussed in this article will maximize the utility of peer-to-peer saving and lending through financial institutions like the Credit Unions. 

Persona of clientele of the new financial product discussed can be characterized by the following traits:
  • Age: 25-45 years
  • Annual Salary: $5k-$25k
  • Location: Developing and developed countries

The common pain points of the clientele revolves around their tendency of scraping almost all income primarily for survival, education and health services, and secondarily for amenities, travel and luxury. Such tendency makes it difficult for them to save large amount of money that can be invested for a secure future. For the greatest good, they need a new financial product that can extend substantial amount of credit to them with low interest rate, less red tape and reasonable amount of collateral obligation. 


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The Credit Unions should focus more on improving lives by supporting entrepreneurial spirit and big expenses like mortgage/renovation of house; rather than only bailing their clientele from crises.

To cater this need, I propose a new financial product, ‘Finance for the Greatest Good’ (FGG), which will be based on debt-based Peer-to-Peer crowdfunding. Such P2P crowdfunding will be used to kick-start entrepreneurial spirit and business ideas of the clientele and their families/relatives.

The FGG model will be based on a certain number of clients saving a specific amount of money every month as a group to randomly distribute the collection (either partial or complete) to one of the members of the group. This process of P2P crowdfunding and random distribution of fund to one of the members will be repeated until all of the members are crowdfunded. The recipients of crowdfund will be charged a very low interest while the remainders who have never received fund will earn saving interests. 
Debt Based Peer to Peer Crowdfunding - Finance for Greater Good

A Model of Debt Based Peer to Peer Crowdfunding


Similar innovative alternative finance products are being developed by numerous start-ups worldwide. For instance, ‘home Credit to the doorstep’ system has been developed by many alternative financial institutions. However, such system can be best incorporated by the Credit Unions. FGG will not only help its clientele in bailing them out of financial crises; it will also help them bring their dreams to reality. In addition, it will also contribute towards the local and national economic growth. 

Marketing of FGG will be highly successful if narratives of the clients who benefit from FGG are prioritized in all marketing strategies. People love stories that inspire them. Especially, if video materials like documentaries are developed based on the simulation of FGG, it will be highly effective in attracting the millennial generation. The value proposition of FGG should primarily focus on its decisive role in fighting poverty and uplifting the economic conditions of the middle-class people.

In regard to product development, it is suggested that multiple simulations be done among diverse focus groups. As FGG will be based on Peer-to-Peer saving and lending, the clients will independently decide the size and composition of such P2P crowdfunding groups. The Credit Union will simply act as an intermediary that will overlook legalities, contract enforcement and the management of fund raised. The Credit Union may skim off low commission on all savings and lending. 

Though it has previously been explained that the periodic distribution of crowdfunds to be random, it is imperative that such distribution be based on certain logical terms and conditions. All terms and conditions of such P2P crowdfund should be unanimous, and the contracts held by all members should also dictate prospective provisions on how disputes or breach of contracts are handled. In case disputes cannot be resolved by the contracts, they should be resolved by the discretion of a clear majority of the group. Similarly, it was suggested that P2P crowdfunding should be debt based. However, a sophisticated FGG system can be based on equity as well, in which crowdfunding peers may earn certain equity of the business entities launched with the crowdfund.

After significant numbers of simulation, terms of contracts, legalities and procedures can be standardized. All in all, the concept of FGG will expand the horizon of not just the Credit Unions, but also the entire financial market.

Insurance based on P2P Crowdfunding or Contributions from Institutions, NGOs or Personal Websites

The common pain point of the Millennials is their reckless money spending habit. Primarily for living, education and health services, and secondarily for travel, fun and luxury, they scrape all of their cash. This habit makes it almost impossible for them to use a huge lump sum toward the primary priorities of life. Hence, they need a crowdfunded life insurance that with less obligations and flexible rules.

The most convincing reasons to get life insurance that will resonate with Millennials

– Millennials want new experiences and sensations through travel and adventure. In the pursuit of fun, millennial often engage in activities that pose threat to their life and safety. 

– Millennials want to graduate from good universities. While most of them can work to support their study, unexpected scenarios may occur that can make hanging on with the higher study difficult for them. 

– Millennials are not good at managing money. Hence, a life insurance will be a backup for them which shall act as a buffer against the hard times.

Crowdfunded life insurance campaign ideas that address Life events that occur during ages 18-33

 – Health Insurance Campaign: Medical issues that occur during the ages 18-33 can harm the livelihood throughout the life. Hence, health insurance should cover diagnostic and treatment costs. A health insurance plan that funds annual blood tests and other tests will surely attract millennials.

– Global Travel Insurance Campaign: Millennials will surely want to fly to at least 10 countries during ages 18-33. Hence, travel insurance that is valid anywhere around the world will attract millennials.

– Graduation Insurance Campaign: Millennials tend to slack off in both study and work. As they want the most fun in the senior year, they spend money recklessly. Hence, the concept of crowdfunded life insurance will work the best among the college seniors.

Ways to Crowdfund Life Insurance

1. Credit based Peer-to-Peer Crowdfunding

2. Through Donations on Personal Blog, Vlog or Website 

3. Reward System in which Donors will be rewarded for their Contribution

4. Collaboration with universities and companies eager to financially help the Youth

5. Contributions from NGOs working to help Marginalised and Disadvantaged Youth

Technologies and Features Needed

1. A platform similar to GoFundMe, IndieGoGo or YouCaring

2. Almost nil commission taken from donors

3. Multiple payment channels

4. An app that makes tracking crowdfunding easier

5. Flexible deadlines with minimal penalty

6. Reasonable premium

In tandem, a short free online course on Insurance can be launched to make the Millennials understand the crowdfunded life insurance better. A gift card or small reward or redeemable points can be provided once they successfully complete the online course requirements. 

Written by Roshan Adhikari

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