Alternative finance in the UK ticks over £10bn mark

The UK’s crowdfunding and peer-to-peer/marketplace lending platforms top £10bn in funds delivered.

The UK’s alternative finance sector has notched a significant milestone. After emerging way back in 2005 with the launch of Zopa, the world’s first P2P platform, the industry has now passed the £10bn mark in cumulative funding delivered. The sector spans a range of asset types, including consumer loans, small business loans, real estate finance and early-stage equity investment.

The so-called “big three” peer-to-peer lenders – Funding Circle, Zopa and RateSetter – have accounted for close to 60 per cent of the cumulative total, with MarketInvoice and LendInvest also making standout contributions. Peer-to-peer platforms in general are responsible for the vast majority of the £10bn.

The chart below from AltFi Data shows that volumes have in fact continued to grow post-Brexit, with the third and fourth quarters of 2016 constituting records for the industry. It should be noted that AltFi Data’s numbers focus solely on firms that are delivering funding via some kind of marketplace. They do not incorporate the contributions of balance sheet-based alternative lenders like Liberis and Just Cash Flow.

In spite of its growing size, large parts of the sector are still on stabilisers from a regulatory standpoint. A number of peer-to-peer platforms have recently been given full authorisation by the FCA, but the very largest players continue to operate under interim permissions, and have done for some time.

The deadline for submitting applications for full authorisation fell in late October 2015, with the timeframe on decision-making originally set at 6-12 months. Peer-to-peer lenders must hold full authorisation in order to offer investors access to Innovative Finance ISAs. Unless something changes in the next month or so, the likes of Funding Circle and Zopa risk missing out on a second successive ISA season.

£10bn in lending is a significant milestone for the industry, but many believe that the true advent of the IFISA will put the sector on rocket fuel.