Financial transactions through online lending platforms in Europe look set to become mainstream, reaching €3bn in 2014 and €7bn predicted this year.
The UK accounted for three-quarters (€2.34bn) of the total, according to the University of Cambridge research.
As challenger banks and technology companies increasingly moving to the finance space, these findings add fuel to the fire.
The study, by the Centre for Alternative Finance at University of Cambridge’s Judge Business School and professional services organisation EY, looked at peer-to-peer lending platforms and other online alternatives such as equity-based crowdfunding.
It found the UK accounted for 74.3% of total lending using these alternative platforms. The research report said alternative finance platforms are close to becoming mainstream, particularly in countries such as the UK.
In Europe, the online alternative finance market grew by 144% last year, according to the study of 255 platforms in Europe, which covered between 85% and 90% of Europe’s online alternative finance market. The study also included input from 14 national or regional industry associations.
The report found that volumes have been growing steadily at around 75% year-on-year, but the number of businesses funded through these platforms has grown by 133% over the past three years. About 6,000 companies in Europe were funded this way in 2014.
Read more about alternative finance firms
- Peer-to-peer lending accounted for more than £1.2bn of UK loans in 2014, with confidence growing among businesses and individuals in IT-enabled access to credit.
- Cloud-based UK peer-to-peer lending platform MarketInvoice is moving to a Microsoft Azure-based platform as a service (PaaS) to cope with demand.
- Internet giants will not try to replace banks but will disrupt the sector through other services that take consumers away from traditional banks, says Forrester.
“These new forms of alternative finance are growing quickly and this growth is beginning to attract institutional investors,” said Robert Wardrop, executive director of the Centre for Alternative Finance at Cambridge Judge, and co-author of the report. “Alternative finance, at least in some European countries, is on the cusp of becoming mainstream.”
Separately, the Peer-to-Peer Finance Association (P2PFA), recently said the alternative finance sector had doubled in size in the UK since the end of 2013, with more than £2.1bn lent in total. The organisation also revealed the number of lenders had increased by a third and borrowers by 90%.
One UK peer-to-peer lending platform is MarketInvoice. The company buys invoices from small businesses through funds provided by investors. These investors receive an agreed percentage of commission when the loan is made and get the money back when it is repaid.
The platform carries out risk checks on a business with an invoice and then offers its creditors the chance to invest in the invoice based on the assessment. It can have funds from an invoice available to a business within 24 hours.
Since its launch in 2011, MarketInvoice has enabled loans worth £323m to be made to small businesses. The company is growing fast, with £200m of the total loan value being completed in the past year alone.
These platforms are backed at the highest level in the UK. Government-owned British Business Bank, which was set up in 2012 to make more credit available to SMEs, uses several peer-to-peer lending platforms, including Zopa, Funding Circle, Ratesetter and MarketInvoice.