The University of Cambridge, Monash Business School and Tsinghua University launch the 2016-2017 Asia Pacific Alternative Finance Industry Survey with the support of major industry associations across the region.
From equity-based crowdfunding to peer-to-peer consumer and business lending, invoice trading to reward-based crowdfunding, these alternative financing activities are supplying credit to SMEs, providing venture capital to start-ups, offering more diverse and transparent ways for consumers to invest or borrow money, nurturing creativity, fostering innovation, generating jobs & funding worthwhile social causes across the Asia Pacific region.
Opening on February 15th 2017, this benchmarking survey aims to capture the key trends, developments, size, transaction volume and growth as well as the impact of changing regulations on the alternative finance markets across Asia in 2016 – building on last year’s inaugural study.
Last year’s inaugural report – Harnessing Potential – gathered survey data from 503 leading alternative finance platforms operating in 17 Asia-Pacific countries and regions. The study was cited by over 100 mainstream media organisations and has informed policymakers and regulators of industry developments in Asia Pacific countries including Malaysia, Singapore, India, Australia, Hong Kong and Indonesia for example. The report estimated the total Asia-Pacific online alternative finance market to have grown 323% year-on-year to reach 102.81 billion USD in 2015. China is the world’s largest market by transaction volume, registering 101.7 billion in 2015. Outside mainland China, the rest of the APAC region accrued 1.12 billion USD in 2015 with a 313% year-on-year growth rate from the 271.94 million raised in 2014. The authors hope this year’s study will dive even deeper into the growth and dynamics of the APAC alternative finance market. Continue reading →
The central bank of Germany, Deutsche Bundesbank, has published a discussion paper on the role of p2p lending in the consumer credit market written by Calebe de Roure, Loriana Pelizzon and Paolo Tasca. The study analyses data of German p2p lending marketplace Auxmoney.
In recent years, we have begun to observe the growth of the internet economy, which has progressively led to “crowd-based” platforms and the direct matching of lenders and borrowers. Via peer-to-peer (P2P) lending platforms the decision process of loan origination is given into the hands of private lenders and borrowers. This paper investigates how the P2P lending market fits into the credit market and specifically aims to answer the following questions: Why do retail consumers look for P2P financial intermediation? Are the interest rates charged by P2P lenders in Germany higher than those of banks? Are P2P loans more risky than bank loans? Are internet-based peer-to-peer loans substitutes for or complementary to bank loans?
Contribution and Results
The paper shows that loans channelled via P2P platforms involve higher interest rates than loans channelled via the traditional banking sector. They are also riskier than those of banks. However, when adjusted for risk, the interest rates are comparable. Moreover, analysis of the different segments of the bank credit market and P2P lending shows that, after having controlled for interest rate and risk differences, the bank lending volumes are negatively correlated with the P2P lending volumes. Our finding suggests that high-risk borrowers substitute bank loans for P2P loans since banks are unwilling or unable to supply this slice of the market. Continue reading →
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.
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.
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.”
Spanish p2p lending marketplace Arboribus completed a study among 1,500 investors on its platform. Arboribus facilitates loans to SMEs in Spain.
Some of the main findings:
50% of the participants in the survey reinvest their profits
43% intend to increase their investment
30% of investors see the opportunity to assist SMEs to get the funding to go ahead with their projects
29% like that it is an alternative to invest independent from banking. The transparency of the p2p lending and control over where the money of this new model is invested directly collides with the opacity of the banks and the distrust in the management of their savings
in 60% of cases the investor selects the company depending on the sector to which belongs
only 12% analyze the balance sheet and income statement before investing
27% connect via mobile phones, smartphones and tablets
The report ‘Pushing Boundaries – The 2015 UK Alternative Finance Report‘ by Nesta and the University of Cambridge collected very interesting and comprehensive data on the market development by polling 94 marketplaces. The report looks at alternative finance, including p2p lending, crowdfunding (equity/reward/donation-based), invoice trading, community shares, pension-led funding and debt-based securities.
P2P Consumer Lending
The total loan volume in 2015 was 909 million GBP, an increase of 66% compared to 2014. This is the sum of loans made to about 213,000 individual borrowers. A very high percentage (89%) of the investors used autoinvest features of the marketplaces to make the investments. 32% of p2p consumer lending was financed by institutional investors.
P2P Business Lending
This segment nearly doubled compared to the previous year to now 1.49 million GBP. An important factor are real estate related loans (609M GBP). There is a wide and partly complex range of loan types and terms.
The non real estate related loans compromise about 10,000 loans to SMEs. In this sector 42% of investors use autoinvest functionalities.
Depending on which data source is used for comparision p2p lending marketplaces in 2014 have gained a market share of 3.3% to 13.9% of all loans made to SMEs in the UK. Continue reading →
Prof. Dr. Andreas Dietrich of the Lucerne University of Applied Sciences and Arts, Simon Amrein, Reto Wernli and Dr. Falk Kohlmann have published the study ‘Crowdfunding Monitoring Switzerland 2015‘. It analyses the development of crowdfunding in Switzerland giving special attention to the development of p2p lending.
The Swiss market is growing fast; albeit on low absolute numbers compared to other European countries. The market is in a very early development stage. As the following chart shows the volume is mainly generated by crowdsupporting/crowddonating.
Source: Crowdfunding Monitoring Switzerland 2015 study
The total market for new loans to consumers in Switzerland in 2014 was 3.9 billion CHF. Via p2p lending 3.5 million CHF were originated in 2014, so that equals a market share of only 0.1%. But the p2p lending volume has nearly doubled compared to 2013 (1.8 million CHF). The authors state:
The crowdlending market has experienced the strongest year-on-year growth of all crowdfunding segments. … The number of campaigns rose from 116 to 214, and all of them were successfully funded. The current challenge of crowdlending platforms is not finding funders. On the contrary, it is (more) difficult to get borrowers on the platforms. Crowdlending campaign funders invested an average of CHF 1,100, which is substantially different from the figures in reward-based crowdfunding & crowddonating as well as in crowdinvesting. The average campaign amount was CHF 16,200, which was slightly higher than in the past year (CHF 15,000). The average loan amount in crowdlending is very similar to the average consumer loan as of the end of 2014. The crowdlending market is, however, still niche market.
Source: Crowdfunding Monitoring Switzerland 2015 study
Regulation limits that a private consumer loan cannot be financed by more than 20 different individual lenders.
The authors analysed loan data of the Cashare marketplace. Examining who uses p2p lending as a borrower the study finds:
The average borrower age is 38. One fifth had at least one child under the age of 16 at the time the loan was raised. At 37 percent, married people were proportionally under-represented, although they make up 54 percent of the permanent resident population. 19 Homeowners (19 percent) and women (24 percent) are also under-represented. The distribution of nationalities is slightly more representative of the Swiss population. 71 percent of the borrowers were Swiss, while 29 percent of the borrowers were not in possession of a Swiss passport. The average proportion of the foreign-born resident population in Switzerland was 22 percent between 2008 and 2013.
The age distribution of the borrowers leads to the conclusion that crowdlending is currently still primarily used by the tech-savvy Generation Y. 60 percent of all loans raised since 2008 went to people under the age of 40. Only 4 percent of the borrowers for successful projects were over 60 years of age.
Also the borrowers regional distribution shows that use is much more common in the German speaking areas of Switzerland.
Source: Crowdfunding Monitoring Switzerland 2015 study
Goldman Sachs published the research paper ‘The Future of Finance’ analysing the potential impact of alternative finance companies, especially p2p lending marketplaces, on the US banking sector.
Goldman Sachs states ‘We see the largest risk of disintermediation by non-traditional players in: 1) consumer lending, 2) small business lending, 3) leveraged lending (i.e., loans to non-investment grade businesses), 4) mortgage banking (both origination and servicing), 5) commercial real estate and 6) student lending. In all, [US] banks earned ~$150bn in 2014, and we estimate $11bn+ (7%) of annual profit could be at risk from non-bank disintermediation over the next 5+ years.‘
The new study ‘Moving Mainstream – The European Alternative Finance Report‘ is available now (free download). The study by the University of Cambridge and EY looks at the development of p2p lending, p2p equity, crowdfunding and other alternative finance offers in Europe and compares it to the development in the UK. The very comprehensive study combined survey results from 205 platforms in 27 European countries with 50 survey responses gathered from UK platforms as part of the Nesta Study.
P2P-Banking.com was one of the research partners in this study.
Here are the main findings from the executive summary:
Since the global financial crisis, alternative finance – which includes financial instruments and distributive channels that emerge outside of the traditional financial system – has thrived in the US, the UK and continental Europe. In particular, online alternative finance, from equity-based crowdfunding to peer-to-peer business lending, and from reward-based crowdfunding to debt-based securities, is supplying credit to SMEs, providing venture capital to start-ups, offering more diverse and transparent ways for consumers to invest or borrow money, fostering innovation, generating jobs and funding worthwhile social causes.
Although a number of studies, including those carried out by the University of Cambridge and its research partners, have documented the rise of crowdfunding and peer-to-peer lending in the UK, we actually know very little about the size, growth and diversity of various online platform-based alternative finance markets in key European countries. There is no independent, systematic and reliable research to scientifically benchmark the European alternative finance market, nor to inform policy-makers, brief regulators, update the press and educate the public. It is in this context that the University of Cambridge has partnered with EY and 14 leading national/regional industry associations to collect industry data directly from 255 leading platforms in Europe through a web-based questionnaire, capturing an estimated 85-90% of the European online alternative finance market.
The first pan-European study of its kind, this benchmarking research reveals that the European alternative finance market as a whole grew by 144% last year – from €1,211m in 2013 to €2,957m in 2014. Excluding the UK, the alternative finance market for the rest of Europe increased from €137m in 2012 to €338m in 2013 and reached €620m in 2014, with an average growth rate of 115% over the three years. There are a number of ways to measure performance across the various markets. In terms of total volume by individual countries in 2014, France has the second-largest online alternative finance industry with €154m, following the UK, which is an undisputed leader with a sizeable €2,337m (or £1.78bn). Germany has the third-largest online alternative finance market in Europe overall with €140m, followed by Sweden (€107m), the Netherlands (€78m) and Spain (€62m). However, if ranked on volume per capita, Estonia takes second place in Europe after the UK (€36 per capita), with €22m in total and €16 per capita.
In terms of the alternative finance models, excluding the UK, peer-to-peer consumer lending is the largest market segment in Europe, with €274.62m in 2014; reward-based crowdfunding recorded €120.33m, followed by peer-to-peer business lending (€93.1m) and equity-based crowdfunding (€82.56m). The average growth rates are also high across Europe: peer-to-peer business lending grew by 272% between 2012 and 2014, reward-based crowdfunding grew by 127%, equity-based crowdfunding grew by 116% and peer-to-peer consumer lending grew by 113% in the same period.
Collectively, the European alternative finance market, excluding the UK, is estimated to have provided €385m worth of early-stage, growth and working capital financing to nearly 10,000 European start-ups and SMEs during the last three years, of which €201.43m was funded in 2014 alone. Based on the average growth rates between 2012 and 2014, excluding the UK, the European online alternative finance market is likely to exceed €1,300m in 2015. Including the UK, the overall European alternative industry is on track to grow beyond €7,000m in 2015 if the market fundamentals remain sound and growth continues apace.
Today the Nesta Study ‘Understanding Alternative Finance – The UK Alternative Finance Industry Report‘ was released. The researchers Peter Baeck, Liam Collins and Bryan Zhang worked in four stages to compile this great report. One included questioning more than 15,000 users with the help of the platforms in distributing the surveys. Furthermore to gauge awareness of the general public for alternative finance 2,007 consumers and 506 SMEs were questioned.
The more than 90 page report documents and visualizes the fast ongoing growth of all alternative finance sectors in the UK and the positive reception by the users. I will conclude by citing some graphs from the study to induce everybody interested in p2p lending and alternative finance to read the full study.
A new study of the DIW Berlin (see page 3-9) (authors: Nataliya Barasinska, Nicola Jentzsch und Dorothea Schäfer) has analysed Smava loan data from the years 2007 to 2011 and found out that people who use p2p lending Smava for borrowing resemble the average population using conventional bank loans. Against expectations there was no major difference in age structure:
Regarding gender there is a gap, 28% of Smava borrowers are female; whereis in the comparison group 40% of borrowers are female. Regional distribution of borrower residence did not differ from average population. Continue reading →