By Ryan Weeks on Tuesday 6 September 2016
The latest report from Cambridge finds that the European online alternative finance market grew to a size of €5.431bn in 2015.
The €5.431bn number translates to a growth rate of 92 per cent throughout the year. The annual survey, which is entitled "Sustaining Momentum", is conducted by the Cambridge Centre for Alternative Finance, in collaboration with KPMG and CME Group Foundation. It encompasses everything from peer-to-peer lending, to equity crowdfunding, through to rewards-based crowdfunding.
Perhaps most notable among the report's findings was a slowdown in the industry’s growth in Continental Europe. Strip the UK’s contribution out of the data, and the European alternative finance market posted a growth rate of 72 per cent in 2015, down from 82 per cent in the previous year, while growing to €1.019bn in size, up from €595m in the previous year. The report assures us that “the industry is still sustaining momentum with substantive expansion in transaction volumes recorded across almost all online alternative finance models”.
AltFi Data puts the growth rate of peer-to-peer lending in Mainland Europe during 2015 at 63 per cent, down from 87 per cent in the previous year. In general, the continental sector has experienced a more gradual rate of growth than the UK industry did during an equivalent stage in its development.
According to the Cambridge report, the UK was by far the largest single European market in 2015, reaching €4.4bn in cumulative transactions. France came in second at €319m, Germany in third with €249m and the Netherlands in fourth with €111m. The UK aside, Estonia, a celebrated fintech hub, ranked first in Europe in “alternative finance per capita”, at €24.
The Cambridge report also states that institutionalisation “took off” in mainland Europe during 2015, with 26 per cent of peer-to-peer consumer lending and 24 per cent of peer-to-peer business lending funded by a range of pension funds, mutual funds, asset management firms and banks. Those percentages are nearing the levels of institutional involvement that we've seen at some of the UK's largest platforms. The recent launch of new investment vehicles, such as Eiffel eCapital’s €100m Pretons Ensemble fund, will likely accelerate the growth of institutional involvement.
The biggest risks perceived by the industry were identified as increasing loan defaults or business failure rates, fraudulent activities or the collapse of platforms due to malpractice. Doubtless the shadow of disgraced Swedish peer-to-peer lender Trustbuddy – which is now in the process of liquidation – still weighs on the minds of many industry participants.
Robert Wardrop, executive director of the Cambridge Centre for Alternative Finance, commented on the report: “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.”