by Nuno Menezes
The 2nd Annual European Alternative Finance Industry report, which aims to track the growth and development of the pan-European crowdfunding and peer-to-peer lending markets in 2015. The study gathered data from 367 crowdfunding, peer-to-peer lending, and other online alternative finance intermediaries from across 32 countries in geographic Europe. The findings of the report shed light on the state of online alternative finance in Europe.
The survey was carried out by the Cambridge Centre for Alternative Finance at the University of Cambridge Judge Business School, with the support of 17 major European industry associations and research partners, in partnership with KPMG and supported by CME Group Foundation.
The study shows that crowdfunding, peer-to-peer lending and other activities, displaying growth of 92 percent last year, with the total value reaching about €5.4 billion. Without considering the United Kingdom, which is the largest market, the study concluded that the European online alternative finance industry grew from €594 million in 2014 to just over €1 billion in 2015, representing an effective growth rate of 72 percent.
The Alternative Finance Report also highlighted the following findings;
- France, Germany and the Netherlands are considered to be the top three countries for online alternative finance by market volume in Europe, excluding the United Kingdom.
- Estonia was ranked first for alternative finance volume per capita, with €24 followed by Finland (€12) and Monaco (€10) in 2015.
- Peer-to-peer consumer lending was considered the largest market segment of alternative finance, with about €366 million recorded for 2015 in Europe.
- It was also verified that the online alternative business funding increased considerably, with €536m and rising up to 167 percent year-on-year.
- Institutionalisation took off in mainland Europe in 2015 with 26 percent of peer-to-peer consumer lending and 24 percent of peer-to-peer business lending funded by institutions such as pension funds, mutual funds, asset management firms and banks; 8 percent of equity-based crowdfunding, and 44 percent of the surveyed European platforms reported some level of institutional funding in 2015 and just under 30 percent of peer-to-peer consumer lending platforms reported having a majority institutional shareholder.
- It was also mentioned that now there is a high degree of automation in peer-to-peer lending with 82 percent of consumer loans, 78 percent of traded invoices (i.e. receivables) and 38 percent of business loans now funded by automatic selection or automatic bidding processes on European alternative finance platforms.
- Across Europe, perceptions of existing national regulations in alternative finance are divided. 38 percent of surveyed platforms felt their national regulations for crowdfunding and peer-to-peer lending was adequate and appropriate.
- It was observed that the average deal size in equity-based crowdfunding is now approximately €459,000, in contrast to just under €100,000 for peer-to-peer business loans and just under €10,000 for peer-to-peer consumer loans.
- The Donation-based and reward-based crowdfunding models have proved to have the highest levels of female participation. 54 percent of the fundraisers in donation-based crowdfunding are women.
- Across Europe, perceptions of existing national regulations in alternative finance are divided. 38 percent of surveyed platforms felt their national regulations for crowdfunding and peer-to-peer lending were adequate and appropriate.
- The biggest risks perceived by the alternative finance industry are increasing loan defaults or business failure rates, fraudulent activities or the collapse of platforms due to malpractice.
The report concluded that the industry is still sustaining momentum with substantive expansion in transaction volumes recorded across almost all online alternative finance models. The development and adjustment of regulatory regimes are likely to continue in many jurisdictions across Europe, adding uncertainty in the short-term, but may also offer potential, longer-term stability.
If the industry can maintain the creative innovation, keep promoting financial inclusion and transparency, and continue providing great customer service, it should be able to sustain momentum through achieving sustainability.
With consumers looking for alternative methods of finance, this bodes well for the adoption of blockchain technology and cryptocurrencies in Europe; with a new project looking to use the Ethereum blockchain to improve the transaction of fiat currencies and could just be one of many emerging companies to capitalize on the growing demand and blockchain technology.