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The Expansion of Alternative Funding

The UK is a premier location for starting up, and growing fintech innovation. With a first-class talent pool, our industry expertise and research base ensures that we are the world leader in the development and commercialisation of new financial business models and disruptive innovation.

Boasting an annual revenue of £20billion (which continues to surge), the UK and Ireland are the fastest growing region for fintech investment – the UK has the competitive edge.

Traditional bank lending fell dramatically in the wake of the financial crisis, with alternative finance stepping in to plug the gap. Although the EY ITEM Club Forecast for Financial Services predicts net business lending will rise almost 17% by 2018, funnelling an extra £66billion into UK companies over the next four years, alternative finance is not expected to lose its foothold. However, whilst there is an increasing appetite for alternative finance, there’s still a lot to do to inform and educate SMEs about available funding and how to access it – just 44% of British SMEs are aware of alternative finance routes, and merely 9% of SMEs have used these options themselves. This suggests that we still have a lot of work to do in order to increase the sector’s visibility and adoption.

Alternative finance has become a valuable and high-growth segment of the UK’s thriving financial services sector. In addition to helping secure Britain’s leading position as a global financial hub, alternative finance options are also democratising finance and stimulating growth in business sectors far beyond financial services. Alternative finance is no longer a niche alternative, it is helping to grow the seeds of a broad economic recovery.

Boundaries of alternative funding are eroding, as crowdfunding converts to mainstream and the more traditional funding providers embrace the channel. In 2014 the British alternative finance sector provided more than £1.5billion in funding; around £47million through equity crowdfunding. Equity crowdfunding platforms, Ratesetter and Syndicate Room; members of Innovate Finance, grew by an incredible 1,997%. Crowd-based loan options are increasing in attractiveness too, as peer-to-peer lending, equals private investors, or businesses with borrowers; the peer-to-peer sector has doubled since 2013, and received more than £1.2billion of funding last year alone. In fact, the largest and most innovative peer-to-peer lending firms are all members of Innovate Finance, these include RateSetter, Zopa, Funding Circle and LendInvest.

The ability for businesses, especially startups, to access flexible capital quickly and easily is creating a greater demand for revenue based finance. These are some of the themes we aim to address at our Global Summit on March 9th, at the City powerhouse – Guildhall. This historic gathering will explore the impact of fintech on society and the economy, and together with over 700 delegates we will discuss how we can overcome challenges to make UK fintech bigger and better, and, crucially help build a global sustainable banking sector that means something for everyone.

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