European online alternative finance: on the cusp of the mainstream?


Financier Worldwide Magazine

May 2015 Issue

May 2015 Issue

Alternative finance – a term which broadly describes the range of loan options available to consumers and business owners outside those offered through banks and capital markets – can be accessed via numerous channels including online marketplace platforms such as equity or reward-based crowdfunding, and peer-to-peer consumer and business lending. Though a well-established industry in the US and UK, detailed analysis of the prevalence of online alternative finance in other regions, such as continental Europe, is somewhat scarce.

Despite this, and in light of its perceived status as a niche activity outside the US and UK, there is now consensus that online alternative finance is becoming a much-needed source of funding for many businesses throughout Europe, providing credit to SMEs and venture capital for start-ups. Consequently, alternative finance appears poised to step out of the shadows and enter the light of the mainstream.

Moving mainstream: EY and Cambridge report

Filling the gap in European alternative finance knowledge is a 2015 analysis by the Cambridge Centre for Alternative Finance at Cambridge University Judge Business School in partnership with EY. ‘Moving Mainstream: The European Alternative Finance Benchmarking Report’ compares data from 16 European markets (France, Germany, Sweden, the Netherlands, Spain, Estonia, Finland, Switzerland, Italy, Poland, Austria, Belgium, Denmark, the Czech Republic, Slovakia and the UK) and sheds considerable light on the size, growth and diversity of a number of online platform-based alternative finance markets in key European countries.

Drawing on industry data gleaned from 255 leading platforms throughout Europe, comprising an estimated 85 to 90 percent of the European online alternative finance market, the report’s main attention-grabbing revelations are that the volume of online alternative business funding in Europe grew by 144 percent in 2014, to nearly €3bn, and the overall European alternative finance market is projected to exceed €7bn by the end of 2015.

Online alternative finance is becoming a much-needed source of funding for many businesses throughout Europe.

Drilling down, the report shows that in 2014 the UK was by far the largest European country for alternative finance with €2.34bn, followed by France at €154m, Germany at €140m, Sweden at €107m, the Netherlands at €78m and Spain at €62m. Furthermore, European alternative finance (excluding the UK) grew from €338m in 2013 to €620m in 2014 – averaging 115 percent growth over the past three years. In terms of market segment, peer-to-peer consumer lending was the largest at €275m in 2014, followed by reward-based crowdfunding at €120m, peer-to-peer business lending at €93m and equity-based crowdfunding at €83m.

“Access to finance remains one of the most pressing challenges facing European SMEs today”, notes the report. “Studies have found that most managers of European SMEs feel that the availability of bank loans has not improved since the financial crisis, and may even have worsened or deteriorated. This is particularly noticeable in countries that experienced the full brunt of the financial downturn after the 2008 financial crisis. Online alternative finance, especially peer-to-peer business lending, equity- and reward-based crowdfunding and invoice trading, can be a viable and effective source of funding for start-ups and SMEs in Europe.”

Deloitte: comparable data

Echoing the findings of the Cambridge/EY analysis is the ‘Alternative Lender Deal Tracker: Focussed on primary deal flow in the European mid market’ report published by Deloitte in March 2015. Report contributor Michael Dennis, a partner at Ares Capital Europe, believes there exists a massive untapped opportunity for alternative lenders in Europe: “While borrowers in continental Europe have been a little slower to adopt the flexible financing solutions from alternative lenders than those in the UK, this trend is starting to change. We have seen significant deal volumes now from France, Germany and the Nordics over the past two years. Borrowers are starting to understand the benefits of alternative financing solutions.”

In tandem, the research undertaken by Cambridge/EY and Deloitte are independent, systematic and reliable records which scientifically benchmark the European online alternative finance market, informing not only business owners and consumers, but policymakers, regulators, press and the public at large.


As awareness of the steadily growing European online alternative finance market prompts more and more business owners and start-up companies to turn away from traditional lenders and avail themselves of the many lending options available, continued expansion of the industry appears certain. But what, if anything, could emerge to threaten the rapidity of this growth?

“There are a number of risks to its continued development while alternative finance is moving mainstream”, notes the report. “There is a clear need to strike the right balance between a regulatory regime aimed at facilitating market growth, and a regime that provides sufficient protection to investors. The alternative finance industry itself recognises that the market will not develop if the platforms are not perceived as trusted intermediaries by investors and beneficiaries alike.”

Whatever the threat, perceived or otherwise, the European online alternative finance market is clearly flirting with the mainstream lending space – a young industry well on the way to embedding itself within the continent.

© Financier Worldwide


Fraser Tennant

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