Moving Mainstream - The European Alternative Finance Benchmarking Report

22/07/2015

Forewords

Until very recently, crowd and peer-to-peer financing activity was seen by many observers –

particularly those within incumbent financial institutions – as a tiny niche with little prospect

of ever impacting the broader financial system. Not any more. Our findings in this European

Alternative Finance Benchmarking Report suggest that these new forms of alternative finance are

growing quickly, and this growth is beginning to attract institutional investors. Alternative finance,

at least in some European countries, is on the cusp of becoming mainstream.

Researchers at Cambridge have been studying alternative finance since it emerged as a grass-roots

phenomenon following the recent financial crisis, and have authored and co-authored several of the

most-cited reports about the industry. We firmly believe that alternative platforms can increase access

to finance and thereby improve both social and economic outcomes. We felt it was important to provide

a comprehensive picture of online alternative finance across Europe, and draw attention to the dramatic

variation in how alternative finance is developing across European economies. Hopefully, our findings

will cause industry, governments and academics to debate questions about how and why this is the case.

Robert Wardrop

Executive Director, Cambridge Centre for Alternative Finance,

Cambridge University Judge Business School

MOVING MAINSTREAM

Forewords

Alternative finance is a fast-growing area of the financial services sector, but there is little hard

data about the extent of the industry across Europe, so we’re delighted to be able to support the

work of the University of Cambridge in this field.

One of the most noteworthy aspects of the alternative finance sector is that it showcases innovation, in

terms of both business models and technological platforms. A high proportion of the businesses featured

in this survey operate solely online, with websites that have been designed from the outset with the

needs of the customer in mind. Compare that with traditional financial services firms that are working

hard to redesign their products and processes to meet the demands of the internet age.

Indeed, it will be interesting to see how mainstream financial institutions respond to the growth of

alternative finance providers. Will they simply regard them as competitors – albeit relatively small ones

– or will they adopt some of the innovations from alternative finance as a way of increasing their own

product o!ering?

The taxonomy of alternative finance featured in this report identifies nine broad categories of business,

but within these there are many more sub-sectors. Inevitably, there will be winners and losers as the

market develops.

As with any new sector, alternative finance also brings with it new risks. Investors need to understand

the nature of the products, and it’s important that appropriate controls are put in place. So we welcome

the regulation of the sector – which, as this report reveals, is uneven across Europe. While the UK – the

market leader by some distance – has introduced dedicated regulation for alternative finance providers,

many other countries haven’t, or are applying existing regulations that were not specifically designed to

cover this kind of activity. The University of Cambridge has asked some commendably straightforward

questions about di!erent countries’ regulatory frameworks, and the comments from the various industry

organisations make for fascinating reading.

These issues will doubtless be resolved over the coming years, and we’re excited about what the

alternative finance sector can contribute as part of the broader economy. This study will provide a

valuable benchmark against which to measure future developments.

Andy Baldwin

EMEIA FSO Managing Partner

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