Industry reacts to Cambridge report on alternative finance

By Daniel Lanyon on Friday 8 December 2017

Alternative Lending

AltFi hears platforms in the online alternative finance industry are interpreting the latest report from the Cambridge Centre for Alternative Finance.

AltFi hears how platforms in the online alternative finance industry are interpreting the latest report from the Cambridge Centre for Alternative Finance.

A high growth rate in volumes within the alternative finance industry, recorded in a new report, has been warmly received by industry leaders who say the latest data show an increased mainstream acceptance of the market.

The Cambridge Centre for Alternative Finance’s report, entitled Entrenching Innovation, found the UK online alternative finance market grew 43 per cent in 2016 to £4.6bn.

Julia Groves, Head of Debt-Based Securities platform at Downing Crowd says many of the new entrants to the debt-based securities space have been established investment managers – “a clear sign that the grown-ups have started to arrive in the crowdfunding market.”

This is an important milestone, she says, as it shows more experienced investors are gaining exposure to the asset class quelling early views of alternative finance as being too high-risk.

“We’ve been arguing for some time now that not all forms of crowdfunding are created equal and that Debt-based Securities are actually a simple form of lending that is, in many ways, less complex and less risky than both peer-to- peer lending and equity crowdfunding,” she said.

“What’s great to see is that investors are clearly beginning to share this view, with 59 per cent of investors surveyed in the report comparing DBS to the traditionally low risk fixed income asset class and 90 per cent saying they felt DBS platforms were the most clear and transparent in the crowdfunding market,” she said.

Bruce Davis, co-founder and Joint MD of Abundance Investment says the report’s positive numbers show the sector is now maturing steadily and providing an increasingly significant source of capital to the powerhouse of UK economic growth – start-ups and SMEs.

“Abundance was particularly pleased to see our category (debt securities) confirmed as the fastest growing of all at 1,147 per cent year on year, with an accompanying 40 per cent increase in average deal size to £1.4m. It was also good to see hard evidence of investors in debt securities conducting their own due diligence and being comfortable with the risk/reward offers they found,” he said.

Anil Stocker, CEO and co-founder of fintech business finance firm MarketInvoice, says as awareness increases, which will be propelled by PSD2, so too will the use of alternative finance platforms.

“We very much recognise this trend. We advanced £414m to UK businesses in 2016 during which we passed the £1bn in cumulative funding milestone since we started in 2011. This year (2017) we've already advanced £657m and are close to reaching £2bn in funding (currently at £1.7bn). We've increased the range of invoice finance options and launched a new business loans solution by popular demand from our customers,” he said.

SyndicateRoom’s CEO Gonçalo de Vasconcelos says the report “puts to rest” any doubts about whether alternative finance has long-term prospects.

“This is to be welcomed and celebrated by both investors and those looking for finance as a more efficient solution than mainstream finance players provide is now at their disposal. Not only are large financial institutions sitting up and noticing, they are more importantly starting to worry about a market that they used to take for granted. Competition has always been good for the end customer and alternative finance is no different,” he said.

A full copy of the Cambridge Centre for Alternative Finance report can be found here.

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