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Alternative finance in Europe

In 2017, the alternative finance market throughout Europe (including the UK) grew by 36 per cent to €10.44 billion, predominantly in the UK, according to the 4th European Alternative Finance Benchmarking Report from the Cambridge Centre for Alternative Finance at Cambridge Judge Business School.

Shifting Paradigms: The Fourth European Alternative Finance Benchmarking Report

Overall, the total European online alternative finance market (including the UK) grew by 36 per cent to reach €10.44 billion in 2017. The United Kingdom is still the largest individual alternative finance market, albeit with a declining market share from 73 per cent in 2016 to 68 per cent in 2017. Excluding the UK from overall volume, the European online alternative finance industry grew 63 per cent from €2.06 billion to €3.37 billion in 2017, according to the 4th European Alternative Finance Benchmarking Report – Shifting Paradigms issued today (15 April).

The top three national markets for online alternative finance by market volume in Europe, excluding the UK, continued to be France, Germany and the Netherlands. The French market reached €661 million, followed by Germany (€595 million), the Netherlands (€280 million). The Nordic countries collectively generated €449 million, making them the third-largest regional market in Europe following France and Germany.

The report was produced by the Cambridge Centre for Alternative Finance at Cambridge Judge Business School and the University of Agder in Norway. This report was generously supported by Invesco and the CME Group Foundation.

This year’s study gathered data from 269 platforms with reported operations in 2017. These 269 platforms were responsible for 519 unique data entries across 45 countries in Europe.

For the fourth year in a row, peer-to-peer consumer lending accounted for the largest market share of European alternative finance (excluding the UK). This accounted for 41 per cent of all volume, and represented a doubling of growth from €697 million in 2016 to €1.39 billion in 2017.

Online alternative finance for businesses across Europe also continued to grow, providing €1.66 billion to over 24,000 businesses. Overall, business funding in Europe increased by €534 million, raising funds for an additional 9,586 businesses. Debt models (including P2P Business Lending, Invoice Trading, etc.) accounted for 76 per cent of all business finance, while equity models accounted for 21 per cent. The top five countries with the highest volume of business funding were France (€325 million), the Netherlands (€264 million), Italy (€171 million), Sweden (€126 million) and Germany (€106 million).

Internationalisation of platforms is also on the rise. In 2017, 88 per cent of platforms reported some level of cross-border inflows, while 61 per cent reported outflows. This represents a growth of 11 per cent for platforms reporting cross-border inflows, and 17 per cent growth for those reporting cross-border outflows.

Raghavendra Rau
Professor Raghavendra Rau

Professor Raghavendra Rau, Academic Director of the Cambridge Centre for Alternative Finance, said:

“Since 2015, we have released four reports aimed at understanding the development and growth of the European online alternative finance market. This sector has continued to evolve, creating both new opportunities and challenges. It has, therefore, never been more important to understand its evolution and track the trajectory of its growth. This year’s report is entitled ‘Shifting Paradigms’ to emphasise the dynamics of this still relatively nascent marketplace, responding to consumer demands as well as recent regulatory changes.”

Dr Kristin Wallevik, Dean of the University of Agder’s School of Business and Law, said:

“The partnership between the Cambridge Centre for Alternative Finance and the University of Agder’s School of Business and Law is based on a shared commitment to better understanding the emergent alternative finance industry in both words and action. One of the outcomes of this partnership is the current report, which is an impressive read on the current dynamics and operations of alternative finance in Europe highlighting its growth trajectories, innovation directions as well as international scope and impact. The report’s message of ‘shifting paradigms’ is of relevance for the financial sector, business education and research sectors. Here, by focusing attention on the important financial aspects of our ever more digital lives, we actively contribute to more informed decision making, policy formulations, as well as responsible development of new industries.”

Dave Dowsett, Global Head of Technology Strategy, Innovation and Planning, Invesco, said:

“Rapid technological change and increasing connectedness have allowed the alternative finance market to emerge and flourish to provide capital to businesses and individuals in new ways. At Invesco we’re continually monitoring new technologies and trends to identify opportunities for a competitive edge in investment performance and operational efficiencies. Having strong strategic partnerships like the one with Cambridge helps to provide rigorous academic inputs to how we define our strategies.

“This report marks the fourth annual European benchmarking survey from the Cambridge Centre for Alternative Finance. The report details how alternative finance trends and models are permeating throughout different European regions and economies and provides a comprehensive look at how these models are evolving as they get adopted and mature. The report shows continued growth and dives into sentiment around risk and regulatory environments.”