The world’s first in depth study of Alternative Finance focuses on the UK’s fast growing sector and its challenges. The NESTA (national Endowments for Science, Technology, and the Arts) and University of Cambridge survey defines Alternative Finance, its markets, growth patterns and barriers to adoption. Above all, it looks at why we and the banks should care. Here we give an overview and then look at Peer-to-Peer (P2P) lending for Small and Medium Enterprises (SMEs), Alternative Finance’s biggest sector.
44 facts about Alternative Finance in the UK
Overview of Alternative Finance
The end of 2014 will see the Alternative Finance market’s growth to £1.74 billion, a drop in the bucket for the £1.2 trillion of bank retail deposits. Accenture’s 2014 report estimates that Alternative Finance will take 30% of the retail banking revenues by 2020.1. At its core Alternative Finance funds businesses and individuals outside of traditional banking:
Alternative Finance’s Biggest Player: P2P Business Lending
P2P Business lending is the latest and major player in the current Alternative Finance market.
The average size of a single business lender portfolio is typically £8000 with an average of 52 different business loans in their portfolio.
Socio-Economic Impact of Alternative Finance for P2P business
There are two key socio-economic impacts for business borrowers from Alternative Finance funding. First, accessibility and secondly, improvement in jobs and turnover. In the UK 7000 SMEs and 80,000 personal borrowers have received Alternative Finance funding. A third of business borrowers received funding when they would not have from other sources. The majority of P2P business borrowers have seen an increase in employment, turnover and profit/net income.
Future Growth of Alternative Finance
The emerging Alternative Finance market faces the treble challenges of being unknown and unused by many businesses and only by a single demographic of high-income men. Only 44% of the SMEs surveyed had heard of any Alternative Finance outlets, and only 9% had actually used it. The limited demographic is common in the finance culture, but innovation and education could expand the market to include more women, younger investors and lower income groups.
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1The Everyday Bank: A New Vision for the Digital Age. Accenture. http://www.accenture.com/SiteCollectionDocuments/PDF/Accenture-The-Everyday-Bank-A-New-Vision-for-the-Digital-Age.pdf