A New report from KPMG and peer to peer lender (P2P) TWINO shows UK leads the way in alternative finance but also suggests that continental European lenders catching up. The report shows that the UK still leads the way in alternative finance, with four times higher volumes in aggregate than the rest of Continental Europe. Despite this, the key geographical market for European alternative online lending platforms is still Continental Europe, where lenders are increasingly taking up niches in both the subprime and prime unsecured lending segments.
The research finds that P2P Consumer lending remains the largest component of alternative online lending market with 72% of the total in 1Q-3Q 2016. The top players in the P2P Consumer lending market remain the same as 2015 – Younited Credit (France), Auxmoney (Germany) – followed by TWINO and Mintos, both from Latvia. The main findings of the report include:
- European online alternative lending market volumes have grown steadily year on year between 2013 and 2015 (73% average growth), and increased further by 23% between 2015 and 3Q 2016 reaching EUR 0.6 billion in funded loans as at 30 September 2016 (AltFi Data). The fastest growing segment during 2016 as reported by AltFi Data has been P2P Consumer lending, which grew by 26% between 2015 and 3Q 2016 (invoice trading showed even higher growth of 124%, but it has been significantly lower in absolute terms).
- The ultimate leader in the European online alternative finance scene is the pioneer of alternative online lending, the UK, with four times higher volumes than in the rest of Continental Europe in aggregate.
- The top three countries in Continental Europe for overall online alternative finance market volume have been France, Germany and the Netherlands (Alternative Finance Study 2015 data), while AltFi Data show that 2015 leaders in alternative lending have been France, Germany and Sweden. Notably, in 2016 the picture has changed with Latvia breaking into the top 3 with the third largest volume of funded loans in 1Q-3Q 2016.
- The rise of smaller countries in alternative online lending is possible because country boundaries do not limit growth, and know-how of both investor attraction and lending can be applied across geographies. Although the key geographical market for European alternative online lending platforms is still Continental Europe, where they take up niches in both the subprime and prime unsecured lending segments, platforms also expand to other countries outside Europe.
- Given the example of the UK market development, Continental Europe expects further significant growth, as it now only makes up a minor part of the total unsecured lending in the region.
- P2P Consumer lending is the largest component of alternative online lending market with 72% of the total in 1Q-3Q 2016. While P2P Business lending has been showing significant growth rates between 2013 and 2015 it has not surpassed the P2P Consumer market by volume and has grown only by 1% between 2015 and 3Q 2016 (according to AltFi Data).
- The P2P Consumer lending market grew from EUR 160 million to EUR 450 million between 2013 and 3Q 2106 and showed a 14% average quarterly growth rate between 1Q 2013 and 3Q 2016. Although the year 2015 did not report significant growth, the quarterly volume of loans funded has significantly increased in 2016, showing an average 25% quarterly growth rate.
- In terms of individual platforms, the top players in the P2P Consumer lending market are Younited Credit (France), Auxmoney (Germany) – the same leaders, as in 2015, followed by TWINO and Mintos, both from Latvia. While France and Germany are represented by 1 leading P2P Consumer lending platform per country, in Latvia 2 online marketplaces – TWINO and Mintos – share the market. The two market leaders from Latvia exceeded EUR 100 million in volume of funded loans during 1Q-3Q 2016, outgrowing Finnish players Fellow Finance and Fixura, as well as Estonian Bondora.
Jevgenijs Kazanins, CEO of TWINO said “This report shows that the UK still leads the way for alternative finance, although continental European lenders are quickly catching up. We believe that alternative finance will continue to grow quickly in Continental Europe, potentially to the detriment of the UK as the effect of the Brexit vote begins to weigh on the British economy.At TWINO, we introduced our peer-to-peer lending platform in 2015 and have now grown to become one of the largest platforms in Europe, funding a total of €85 million loans in just thirteen months”.
Jūlija Masāne-Ose, KPMG Baltics Deal Advisory Director, said “Currently, we’re seeing how new technologies are making it possible for smaller countries to successfully compete with well-established players in the market; the alternative finance sector is a key example of this. It’s clear that a nation’s size and geographic location is of far less importance than a successful strategy to attract investors and issue loans. Given the present state of Continental Europe’s market, which is still rather untapped, local mutual borrowing platforms continue to dominate, filling the niches in both high risk and medium risk unsecured loans.
“However, there is an observable new trend now appearing with European mutual borrowing platforms, with many showing a growing interest for expansion in markets outside Europe.”