The European alternative finance market - which includes crowdfunding, peer-to-peer lending and invoice trading - reached €3 billion last year and could top €7 billion in 2015, as businesses increasingly seek more efficient ways to raise funding.
The European alternative finance market - which includes crowdfunding, peer-to-peer lending and invoice trading - reached €3 billion last year and could top €7 billion in 2015, as businesses increasingly seek more efficient ways to raise funding.
Alternative finance, at least in some European countries, is on the cusp of becoming mainstream
Robert Wardrop
The European online alternative finance market grew by 144% last year, and could reach €7 billion in 2015, according to a new report produced by the Centre for Alternative Finance at University of Cambridge Judge Business School and professional services organisation EY (formerly Ernst & Young).
The report includes input from 14 key national or regional industry associations, as well as 255 leading platforms in Europe, covering an estimated 85%-90% of Europe’s online alternative finance market. While previous studies have charted alternative finance in the UK, this report is the first to cover other European countries in detail.
Seen until recently as a niche activity, online alternative finance, including equity-based crowdfunding and peer-to-peer business lending, has become a vital and increasingly commonplace source of essential funding for many businesses throughout Europe, says the report.
Online alternative finance grew across Europe from €1.21 billion in 2013 to €2.96 billion in 2014. The overall European alternative industry is on track to grow beyond €7 billion if the market fundamentals remain sound and growth continues at current rates.
The volume of online alternative business funding has been growing steadily at around 75% year on year, and the estimated number of businesses funded in this way has been growing at an even faster average rate — 133% over the last three years to around 5,801 companies in 2014.
“These new forms of alternative finance are growing quickly, and this growth is beginning to attract institutional investors,” said Robert Wardrop, Executive Director of the Centre for Alternative Finance at Cambridge Judge, and co-author of the new report. “Alternative finance, at least in some European countries, is on the cusp of becoming mainstream.”
“To date there has been little hard data about the extent of the industry across Europe,” said Andy Baldwin, EY Managing Partner, Europe, Middle East, India and Africa Financial Services. “This report shows that, while it is still considerably smaller than the industry in the UK, alternative finance on the continent cannot be ignored. The whole financial services industry should be watching this space with growing interest and this study will provide a valuable benchmark against which to measure future developments.”
The new report is written by Robert Wardrop, Bryan Zhang, Operations and Policy Director of the Centre for Alternative Finance, Raghavendra Rau, Sir Evelyn de Rothschild Professor of Finance at Cambridge Judge and Research Director of the new Centre, and Mia Gray, Senior Lecturer at the Department of Geography at the University of Cambridge, who has focused on alternative finance and regional economies.
The new Centre provides a disciplined research framework to support the fast-growing structures and activities of alternative finance, in order to address the growing needs of academics, policymakers, regulators and industry. The Centre plans to launch a research programme, host a Global Alternative Finance Data Depository, and organise conferences, networking events and a fellowship programme.
Moving Mainstream: The European Alternative Finance Benchmarking Report is available to download for free at www.jbs.cam.ac.uk/ccaf/movingmainstream.
Originally published on the Cambridge Judge Business School website.
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