New European Alternative Finance Industry Report – Sustaining Momentum

The European online alternative finance market, including crowdfunding and peer-to-peer lending, grew by 92 per cent in 2015 to €5.431 billion, according to the results of the 2nd Annual European Alternative Finance Industry Survey conducted by the Cambridge Centre for Alternative Finance at University of Cambridge Judge Business School, in partnership with KPMG and supported by CME Group Foundation.

The report released today, titled “Sustaining Momentum”, had the support of 17 major European industry associations and research partners, and was based on data from 367 crowdfunding, peer-to-peer lending and other alternative finance intermediaries from 32 European countries – capturing an estimated 90 per cent of the visible market. P2P-Banking.com is one of the research partners.

The United Kingdom was by far the largest in Europe at €4.4 billion, followed by France at €319 million, Germany at €249 million and the Netherlands, €111 million. Other large European markets include Finland with €64 million, Spain at €50 million, Belgium at €37 million and Italy at €32 million. The Nordic countries collectively accounted for €104 million, while Central and Eastern European countries registered a total of €89 million.

Excluding the UK, the European alternative finance market grew by 72 per cent from €594 million in 2014 to €1.019 billion in 2015.

“Although the absolute year-on-year growth rate slowed by 10 per cent” (from the 82 per cent growth excluding the UK between 2013 and 2014) the industry is still sustaining momentum with substantive expansion in transaction volumes recorded across almost all online alternative finance models,” the report said.

Peer-to-peer consumer lending is the largest market segment of alternative finance, with €366 million in Europe in 2015. Peer-to-peer business lending is the second largest segment with €212 million, with equity-based crowdfunding in third with €159 million and reward-based crowdfunding fourth at €139 million.

Sustaining Momentum Figure 11
Table: Figure 11, page 31 of ‘Sustaining Momentum’, volumes by market segment in Europe 2015 (outside UK)

Among other findings:

  • Estonia ranked first in Europe in alternative finance volume per capita at €24, followed by Finland at €12 and Monaco at €10 outside of the UK.
  • Online alternative business funding increased by 167 per cent year-on-year to €536 million raised for over 9,400 start-ups and SMEs across Europe.
  • Institutionalisation took off in mainland Europe in 2015, with 26 per cent of peer-to-peer consumer lending and 24 per cent of peer-to-peer business lending funded by institutions such as pension funds, mutual funds, asset management firms and banks.
  • Across Europe, perceptions of existing national regulations in alternative finance are divided. About 38 per cent of surveyed platforms felt their national regulations for crowdfunding and peer-to-peer lending were adequate and appropriate, 28 per cent perceived their national regulations to be excessive, and a further 10 per cent said current regulations were too relaxed.
  • 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.

Perceived risks
Chart: Figure 28, page 47 of ‘Sustaining Momentum’, risks to the industry as perceived by the polled platforms

Robert Wardrop, Executive Director of the Cambridge Centre for Alternative Finance, said: “European alternative finance transaction volume increased to more than €5 billion in 2015, with volume outside of the UK market exceeding €1 billion for the first time. The European alternative finance industry is still small, however, and the slowing rate of growth during the year is a reminder of the risks the industry must contend with in order to transition from a start-up to a sustainable funding channel within the European financial services ecosystem.”

Irene Pitter, Global Executive, Banking & Capital Markets and member of the FinTech Leadership Team at KPMG, said: “This report shows that the alternative finance sector is set to continue to grow and mature. 2016 marks a significant year for ‘alternative finance’ in Europe as the market demonstrates clear signs of continued strong growth and increased maturation in the sector as a whole. European activity, excluding the UK, showed solid growth of 72 percent last year and demonstrated client demand for alternative finance solutions even in the smaller EU countries.”

Rumi Morales, Executive Director, CME Ventures, said: “The prominent feature of financial technology is that it is truly borderless. No one country is harnessing alternative financial markets or business models to the exclusion of any other. Rather, from the UK to Estonia and from Finland to Monaco, the entire European continent is experimenting and expanding upon innovations that can provide greater access to capital and financial services to more people than ever before.”

See the full report below. Continue reading

Fellow Finance Adds SME Loans

Fellow Finance logoFinnish p2p lending marketplace Fellow Finance now also offers SME loans.

In the service, companies can apply for financing for growth and investments from Fellow Finance’s investors.. Fellow Finance has intermediated loans for consumers through its service for 40 million EUR during a period of 12 months. Opening a financing service for companies stems from the needs of Fellow Finance customers and with the new Crowdfunding Act established legal framework for the operation has been established.

I checked the marketplace. Right now there is one loan request for 70,000 Euro at 11% interest rate, 60 month term listed.

‘We have already received requests and inquiries from our clientele for a long time about whether we could also start financing companies. Many of our customers are either current or former entrepreneurs who understand the financing challenges faced by Finnish SMEs in different phases of business. They have a strong desire to finance other entrepreneurs and offer promising projects the chance to really take off’, says Jouni Hintikka, CEO of Fellow Finance. Continue reading

Taaleritehdas becomes an owner of the P2P lending company Fellow Finance

Taaleritehdas invested 2 million EUR in the peer-to-peer (P2P) lending company Fellow Finance Oy and, at the same time, sold the entire stock of its Financing Company Lainaamo Ltd to Fellow Finance Oy as a share exchange. Lainaamo has a consumer credit portfolio of approximately 20 million EUR  with thousands of consumer customers. After the acquisition, Taaleritehdas owns 38.4% of Fellow Finance Oy. In addition, Taaleritehdas has an option to increase its holding in the company by 7.3%.
Fellow Finance’s founders, Jouni Hintikka and Teemu Nyholm, each own 18.4% of the company. In total, Fellow Finance key persons have a 57.3% holding in the company.

According to its vision, Taaleritehdas aims to develop the Finnish capital market. Taaleritehdas believes that increased direct financing will be one of the most significant changes in the finance industry in the future. The focus in financing will increasingly shift from the bank-centric approach towards direct financing. Another strong megatrend in the financing sector, as seen by Taaleritehdas, is digitalisation. Both Fellow Finance and Lainaamo offer their services completely online. Ownership of Fellow Finance enables Taaleritehdas to offer its customers a new investment form and to utilise digitalisation in its own activities, as well. The merger of Lainaamo and Fellow Finance will not affect the position of borrower
customers or investors. Continue reading