Expanding Horizons: The 3rd European Alternative Finance Industry Report

The 3rd Annual European Alternative Finance Report presents the most comprehensive analysis of the status of alternative finance industry in Europe, covering more countries, alternative finance models, as well as industry trends and developments than was available in its predecessors. Much effort has been placed on data quality verifications and clarifications in an ongoing productive and collaborative dialogue with all platform informants and research partners. Here, we wish to acknowledge their invaluable contributions, without which this report could not have been written. Overall, the data collected shows that 2016 saw European alternative finance doubling its volumes from 2015, and continuing an impressive growth. When placed into its short historical perspective, an impression emerges of an industry progressing from an introduction stage catering to innovators, into the growth stage catering to a growing number of early adopters. This growth phase is characterized by entry of new platforms and service providers, overall increasing competition, emergence of first cases of consolidation, diversification of products, and investments in process effectivization and streamlining. Despite exhibiting continuous healthy growth, Europe still punches well below its potential in most countries. Challenges remain both in terms of market education, and amendments of regulation. In Europe regulatory challenges are faced with two barriers. First, most countries have relatively mature and well-established regulatory systems. And, second, these vary significantly across countries. In this respect, our study provides initial evidence that more favorable regulation at national level is associated with higher volumes per capita, as well as with higher share of funding reaching businesses. Accordingly, one can expect that if regulatory conditions will continue to improve at both national and international levels, the industry will be able to maintain and enhance its growth. Nevertheless, one should acknowledge that the story of European alternative finance sector growth, more importantly, is the story of the democratization of access to finance and investment opportunities for people and ventures in Europe. When we present that the industry has generated EUR 2 Billion in 2016, it implies that close to 95% of this sum was actually invested in European venturing reaching businesses, entrepreneurs, artists, and social activists. All aim at creating value to consumers, investors and society via ventures made possible thanks to the support of the crowd. Accordingly, and by extension, more accommodating regulation for the industry, also implies greater access to finance for multiple stakeholders in the economy and more opportunities for value creation. Here, our findings leave much room for optimism for the coming years. Not only are volumes growing strongly, but platforms are investing actively in innovative solutions towards improving performance and customer service. Moreover, evidence suggests that a greater share of platforms engage in cross-border transactions, although, in most cases, these still represent a relatively modest share of overall volumes (thanks to limitations mentioned above). Finally, we hope this report, and the insights emerging form it, will be of help to all stakeholders interested in the development of alternative finance in Europe. And we look forward to a continued cooperation with all our partners in monitoring industry developments in the future.