All posts by Niels Visser

Beyond financing: crowdfunding as an informational mechanism

Author paper: Viotto da Cruz, J.

The 2008 financial crisis generated many financial start-ups as incumbent banks were imposed with stricter regulations and a growing sense of mistrust towards them. These financial start-ups offered various services including crowdfunding. Crowdfunding in particular was a new way to finance new ventures as banks, due to higher capital requirements, no longer lent money that easily (Darolles, 2016). Besides studying what makes a crowdfunding campaign successful, crowdfunding can be a source of information for entrepreneurs on the interest of customers about a project. Viotto da Cruz (2018) studies this information component of crowdfunding, analyzing data from Kickstarter. In doing so, the author studies whether several pieces of information lead to a higher probability of releasing a product in the market.

As entrepreneurs face uncertainty when they release new goods to the market and contributors to crowdfunding projects choose the amount they give to a project, this reveals how much potential buyers value the project. Therefore, the central research question of the paper is: how do project owners respond to information from their crowdfunding campaigns? In particular, the author studies how they respond in terms of actually releasing the product after a crowdfunding campaign. Thus, it is hypothesized that an increase of the public’s valuation will lead to more released products as  uncertainty is reduced prior to release.

The following four variables are studied as a proxy for the crowd’s valuation:

  • The total number of supporters. This variable is interpreted as the size of the crowd that welcomes the project.
  • The average collected. This variable is interpreted as how much each participant values the project and is calculated by dividing the total amount collected by the number of participants, as Kickstarter does not publicly reveal how much each participant funded the project.
  • The total amount collected during the campaign. This variable is interpreted as how much the total crowd appreciates the project.
  • The pledged ratio. This variable is the total amount collected divided by the original goal.


Crowdfunding campaigns on Kickstarter are funded through an all-or-nothing strategy, which means that entrepreneurs only have access to capital if they successfully reached a certain financial threshold. So, if their target is not reached, their project will be unfinanced through the platform. This creates two subsamples, successful and unsuccessful projects. Even if the project is unsuccessful on Kickstarter, it is hypothesized that the probability of releasing a product increases with the contribution. So, the focus of this study is on unsuccessful projects.

To study the hypothesis the authors focused on projects that aim on producing music albums. Musicians are considered as entrepreneurs on crowdfunding platforms as they independently need to fund their music album. In order to study whether they actually released the album, data from iTunes and Amazon was collected. Data consists of 707 unique project owners, from which 185 are unsuccessful and 522 successful, and is collected in a period from August 2014 to May 2015.

A number of control variables are being taken into account. First, data from the artists’ websites is collected, in order to collect the number of previous albums, which is considered as a proxy for alternative financial resources. Secondly, the number of Facebook fans are being taken into account, as more fans would lead to more promotional possibilities. Furthermore, it is assumed that the crowdfunding campaign and production happen sequentially, which could in fact also happen simultaneously. This is important, as this may influence the decision to release the product as fixed costs may already been incurred. As releasing may just be a reason to recover these fixed costs, the control variable production phase is being taken into account by using Kickstarter’s estimated delivery of rewards as a proxy. Also, the author controlled for genre, as some genres have different commercial appeals. Furthermore, project quality is being taken into account as presence of video and high text quality signals the effort an entrepreneur has taken to release the product.


After analyzing all the variables, all four variables (total collected, supporters, pledged ratio and average collected) are statistically significant and thus imply that informational mechanism effect the release of new products in a crowdfunding context.  Furthermore, probability on product release is calculated when the number of supporters is increased by 10%. Overall, an increase of 10% leads to 1.4 percentage point of probability increase of releasing the product to the market. However, between the variables, this increase in probability differs, suggesting that each type of information adds differently to the total information mechanism.



The strength of the paper is the robustness of the findings as results are controlled by various control variables specific to the production of music. Furthermore, the author analyzed whether the results also hold for the successful project owners, which in fact none of the variables is statistically significant. This means that the informational mechanism only works for the failed projects. Also, to further check whether there is a casual link, the author analyzed whether the results hold in another category. Although, the variables contribute differently to the results, the variables were statically significant for the Design category on Kickstarter, which contributes to the robustness of the findings.



The main weakness of the paper is that the author makes some assumptions about the possibility of alternative financing outside the crowdfunding platform, which may explain why unsuccessful project still will be released to the public. To say, that it is unlikely for an artist to use multiple platforms at the same time is, in my opinion, not a strong argument. Furthermore, the author only studied Kickstarter, which may reduce the generalizability, as other platform for music producers may attract other artists with different interpretations of the crowd’s valuation.



Darolles, S. (2016). The rise of fintechs and their regulation. Financial Stability Review, 20(4), 85-92. Retrieved from https://publications.banque-

Viotto da Cruz, J. (2018). Beyond financing: crowdfunding as an informational mechanism. Journal of Business Venturing

Yolt: own back your financial data

A growing sense of mistrust towards traditional banks after the 2008 financial crisis gave rise to many new fin-techs. These new fin-techs were focusing on new financial services, including crowdfunding, mobile payment solutions and financial platform, which traditional banks were not offering to large extent at that time (Darolles, 2016). Personalized solutions to financial matters offered by these fin-techs were in stark contrast with the traditional finite services and products offered by traditional banks. Technological advantages and new regulation reduce the entry barriers to the financial sector, which give fin-techs access to technological solutions at much lower cost as traditional players often have a disadvantage due to their technological architecture (Darolles, 2016). Millennials in particular have lost their interest in financial matters, as traditional banking is considered too functional (Tuk, 2018). Fin-techs focus on this generation with new interactive solutions where customers are actively involved in solutions for financial matters.

Traditionally, banks were the only institutions that had direct access to customer financial data. With the introduction of new European financial regulation (PSD2) last month, the way how we interact with our banks may fundamentally change. The most fundamental change of the new PSD2 regulation is that banks are obliged to share financial data with third parties if a customer wants to share them (Manthorpe, 2018). In this way, third-parties, like fin-techs, can access the bank account of a bank customer through an API and provide services on the basis of this data. APIs have been used for years, but last decade’s technological developments allow banks to operate a new form of API management. Financial account data resulted from open APIs is used by the newcomers and therefore challenge traditional banks. For traditional banks the new PSD2 regulation have large strategic implementation as they may lose the customer interaction and just become infrastructure providers while others leverage on more profitable financial services. So, long-term success of traditional banks depends on how they respond. To a large extent, traditional banks are now collaborating with fin-techs that provide these third-party services. INGs answer to these developments is the application Yolt, a smart money management application, leveraging on the developments of PSD2 and open banking.


How does Yolt work?

Yolt mines customer data across different accounts of different banks and provides them in a single overview to manage all financial matters (Schiffers, 2017). Integrating accounts from different bank accounts provides Yolt with an extensive dataset from which the application can analyze financial behavior. In this way, data analysis can predict balances and provide tips on budgeting and savings, which will give customers more insight into their finance (Tuk, 2018). This does not stop here, as Yolt offers a special marketplace for partners. For example, utility service providers can collaborate as a partner with Yolt and offer comparing services on the basis of financial data of the customers (Tuk, 2018). So, if your energy bill may be reduced by switching energy provider, Yolt will automatically notify the customer. Furthermore, customers can actively be involved when one of their contracts ends. Again, Yolt will automatically notify the customer and may offer substitutes to the current contract.


Efficiency criteria

After one year of developing the application internally at ING, Yolt was released to the public in the summer of 2017 in the United Kingdom (Schiffers, 2017). In January 2018, the introduction month of the new PSD2 regulation, Yolt had 100.000 users (Schiffers, 2017).  As PSD2 will mandate banks to share financial data, competition about financial data will be fierce as Yolt will not only compete with traditional banks but also big tech companies like Google and Apple who both have their interest in managing finance. From a customer’s perspective, using an open banking initiative like Yolt puts the customer back in control and possession of their own financial data and can decide themselves how they want to participate in analyzing their data. The traditional financial ecosystem limits customers in awareness and access to better opportunities, which is one of the reasons that bank customers do not change quickly the bank that their parents also had. Transparency did shake up many industries, like how Trivago did shake up the travel industry, Yolt may shake up the financial sector by providing the most fitting financial product to the customer (Tuk, 2018). This may disadvantage the parent company ING, as Yolt will offer also products and services from competitors. So, from Yolt/ING’s perspective the Yolt platform is a way to leverage new regulation that will strategically impact a traditional bank like ING. In this way, ING can test new ideas concerning open banking and PSD2 in the UK market. This market is particularly important as the UK government is one of the frontrunners in the EU in terms of open banking (Manthorpe, 2017). In collaboration with the eight largest banks in the UK, Open Banking Limited a non-profit organization, has already been set up to streamline and standardize the processes to facilitate an open banking ecosystem (Manthorpe, 2017). Learning from the UK launch, ING could leverage open banking in other markets as well. Furthermore, ING can test new revenue possibilities as Yolt will receive a commission on the contract concluded through the platform.

In summary, Yolt will bring value to both the consumer as well as ING, by providing insights into financial data and related products and services as well as providing insights how to best practically apply the possibilities of the new regulation.



Darolles, S. (2016). The rise of fintechs and their regulation. Financial Stability Review, 20(4), 85-92. Retrieved from


Manthorpe, R. (2018). To change how you use money, Open Banking must break banks. Retrieved 17 February 2018, from


Schiffers, M. (2018). Yolt verkent voor ING de wereld van fintech. Retrieved 17 February 2018, from

Tuk, Y. (2018). Fintech Yolt over eigen groei en komst PSD2: ‘Niet direct open Europa’. Retrieved 17 February 2018, from