The University of Cambridge has released its second report on Alternative Finance Worldwide, a survey conducted with 703 platforms around the world to define the size and dynamics of markets related to P2P Lending (Consumer and Business), Balance Sheet Lending, Invoice Trading, Minibonds, Equity Crowdfunding, Reward and Donation Crowdfunding.
The global online alternative finance market has grown steadily over the past three years. Global volumes (excluding China, which weighed 48% of the market in 2019 and only 1% in 2020) increased 3% from $89 billion in 2018 to $91 billion in 2019. And in 2020, notwithstanding COVID-19, global volume increased an additional 24% year-over-year to $113 billion.
In 2020, the largest regional alternative market was the U.S. with $73.62 billion, representing 65% of total volume. This was followed by the UK ($12.64 billion), Europe excluding UK ($10.12 billion), Asia Pacific excluding China ($8.90 billion), Latin America ($5.27 billion), Sub Saharan Africa ($1.22 billion), China ($1.16 billion), and the Middle East and North Africa ($0.59 billion).
Global P2P/Marketplace Consumer Lending in 2019, excluding China, remained the largest model type, with a total volume of $33.6 billion, accounting for 37% of the total in 2019. In 2020, although still the largest business model, growth slowed significantly, representing a total volume of $34.7 billion, or 31% of global market share.
Given the relative dominance in the U.S., it is not surprising to see that the Balance Sheet Business Lending model (business loans where the platform is the lender and not the intermediary as in P2P lending) had the second-highest transaction volume for both years, with $19 billion in 2019 and $28 billion in 2020. Interestingly, the research found that 16% of platforms that previously ran only a P2P/Marketplace model now also adopted Balance Sheet Business Lending.
The donation-based crowdfunding model has experienced exponential growth of $7 billion globally in 2020. The 160% jump in annual growth between 2019 and 2020 can be attributed in large part to the flurry of charitable, community, and health initiatives tied to COVID-19 related online fundraising activities around the world.
Alternative finance market concentration, at the aggregate level, remains relatively low. However, the analysis finds that 7 out of 10 online alternative models experienced higher market concentration in 2020 compared to 2019: in particular, this happened primarily in P2P Business Lending, Balance Sheet Business Lending, and P2P Consumer Lending.
Read more on the subject and find the latest business news in the world with the Born2Invest mobile app.
Zoom in on Europe
From 2013 to 2019, European online alternative finance market volumes (including the UK) grew steadily from $1.5 billion in 2013 to $23.2 billion in 2019. However, 2020 saw an overall decline to $22.6 billion, representing the first decrease in market volume since 2013.
The UK accounted for 56% of the European market by volume. In the U.K., the online alternative finance sector has experienced steady annual growth in market volume over the past five years, increasing from $4.9 billion in 2015 to $12.6 billion in 2020, and despite the challenges posed by COVID-19 and other factors, the U.K. online alternative finance market grew from $11 billion in 2019 to $12.6 billion in 2020.
When excluding the UK, European market volumes declined more substantially from 2019 to 2020, reporting a $2.3 billion reduction from $12.2 billion in 2019 to $9.9 billion in 2020. When looking at market volume at the country level, some countries bucked the overall European trend and grew between 2019 and 2020: Germany ($1.42 billion to $1.48 billion), France ($1.32 billion to $1.66) billion) and Italy ($1.55 billion to $1.86 billion).
47% of volumes financed SMEs
In 2020, the volume of online alternative finance (excluding China) that went to micro, small and medium-sized enterprises (MSMEs) increased significantly. In 2019, global online alternative finance for businesses accounted for $35 billion, up 13% year-over-year, and in 2020, it increased significantly by 51% year-over-year to $53 billion. By comparison, in 2019, funding to enterprises had been 38% of total volume, while in 2020, funding to enterprises represented 47% of total volume.
As in previous years, online alternative finance for enterprises was largely derived from debt-based models, with $32.8 billion in debt financing raised in 2019 (or 94% of all enterprise financing) and $49.6 billion raised in 2020 (94%). Equity-based models contributed $1.5 billion in 2019 and $2.2 billion in 2020 (3% in 2019 and 4% in 2020). Non-investment models (e.g., Reward Crowdfunding) accounted for $533 million in 2019 and $744 million in 2020.
The highest funding volumes for SMEs were recorded in the United States ($15.4 billion in 2019; $32 billion in 2020), the United Kingdom ($6.5 billion in 2019; $6.4 billion in 2020), and Europe ($4.3 billion in 2019; $5.2 billion in 2020).
The growing role of institutional investors
Institutional investors play an important role in the functioning of the online alternative finance market, and even more so in the context of the pandemic. Based on data provided by 58% of firm-level observations, in 2019, approximately $28.5 billion of the market volume was funded by institutional investors, representing 16% of the entire global volume for that year. In 2020, based on 60% of firm-level observations, approximately $43.6 billion of the market volume was funded by institutional investors, representing 42% of the entire global volume. This represents a 53% year-over-year growth in institutional funding volume.
Overall, debt-based models account for the highest percentage of institutional funding, with most debt-based models having more than two-thirds of total funding provided by institutional investors.
Geographically, platforms in the U.S. and Canada had the highest level of institutionalized funding in both 2019 (74%) and 2020 (98%).
Platforms’ perceived risks
Looking at key risks from a platform perspective, for most respondents, a change in regulation is perceived as the greatest potential risk to companies. These concerns were particularly evident in companies offering services related to P2P consumer lending (50%), balance sheet consumer lending (52%) and Invoice Trading (50%). Additionally, customer fraud is ranked as a top concern for Invoice Trading (58%), p2p real estate lending (42%) and balance sheet consumer lending (41%) platforms.
DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Born2Invest, its management, staff or its associates. Please review our disclaimer for more information.
This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.
First published in Crowdfunding buzz, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
Although we made reasonable efforts to provide accurate translations, some parts may be incorrect. Born2Invest assumes no responsibility for errors, omissions or ambiguities in the translations provided on this website. Any person or entity relying on translated content does so at their own risk. Born2Invest is not responsible for losses caused by such reliance on the accuracy or reliability of translated information. If you wish to report an error or inaccuracy in the translation, we encourage you to contact us.
Jazz Pharmaceuticals’ Leukemia Drug Receives European Commission Approval
Jazz Pharmaceuticals is a biopharmaceutical company dedicated to the development of drugs in neuroscience and oncology. Founded in 2003 in...
Citi Announced a $6 Million Loan to Sempli for SME financing
The credit granted by Citi was given in partnership with high-impact investors and multilateral development organizations. They all seek to...
How Will the Price of Ripple and Cardano Develop in the Next Few Days
The BOLL indicator shows no specific pattern and denotes the support price of $0.4969 and the resistance price of $0.5059,...
RADEEF: a 182 Million Dirham Plan to Combat Flooding in Morocco
RADEEF is also planning major expansion projects. Firstly, it plans to launch work on extending the wastewater treatment plant. The...
How Institutional Investors Feel About Impact Investing
Investors continue to face greenwashing when implementing impact investing. Among their key concerns are misleading or exaggerated impact claims (60%),...
Cannabis1 week ago
CSC Bolzano – the Most Demanding CSC in the German-Speaking Area
Crypto2 weeks ago
Breakthrough Crypto Profits — Top Earners Are Turning to ICONOMI Copy Trading
Fintech6 days ago
Latin American Fintech Companies that Raised the Most Capital This Year
Fintech2 weeks ago
Fintech Company Cleafy Raises €10 million