SINGAPORE — Crowdfunding, crowdsourcing and venture capitalists (VCs): These financing platforms are offering alternative funding opportunities to start-ups and small and medium enterprises (SMEs), while capturing a slice of the finance market not filled by banks.

Due to less stringent regulations and fewer constraints from legacy systems, fintech companies are able to embrace technology more quickly than traditional lenders, changing the way business is done, said Dr Jeffrey Chi, the chairman for the Singapore Venture Capital & Private Equity Association at the inaugural SME Capitalising Opportunities & Realising Expectations Event hosted by crowdfunding company CoAssets.

“There’s a lot happening in fintech — crowdfunding, crowd sourcing, VCs and mobile payments. It’s a very uncertain and new space. We are moving to a little bit of revolution right now,” said Dr Chi, who is also the vice-chairman of the venture capitalist firm Vickers Venture Partners.

Fintechs are currently less regulated and hence “more flexible” as compared to banks, he said. Speedwise, it can also be faster to obtain funding from crowdfunding. Crowdfunding company CoAssets, for example, was able to raise S$200,000 within 30 minutes for a toy manufacturer last month. The toy manufacturer had applied for a short-term business loan through the company’s crowdfunding platform to fund a themed event to promote and sell its products.

Through crowdfunding, investors also benefit through an avenue to get higher returns. “On average, returns range between 7 to 15 per cent per annum. These really open a front, and change the way businesses are being done,” said CoAssets CEO and co-founder Getty Goh.

Professor Jochen Wirtz at the Department of Marketing at National University of Singapore, said fintech companies such as crowdfunding firms may be attractive to SMEs who have a hard time securing loans from traditional finance providers such as banks.

“The owner of the SME has to guarantee for the loan or mortgage the house as a security for the loan …whereas crowdfunding doesn’t ask for that typically … (When) you borrow money from a crowdfunding platform, over time you can build up a reputation, a credit score. Over time, the interest rates (SMEs) have to pay go down and the funding is also easier to get.”

When asked about the size of funding obtained via fintech companies in Singapore, Mr Wirtz was unable to provide an estimate, but said that there was room for growth. “In the US and the Europe it is more mature,” he said.