9 Telling Graphs from the 4th UK Alternative Finance Industry Report

Earlier this month, the 4th UK Alternative Finance Industry Report was released by the University of Cambridge Judge Business School. In our “Need-to-Know Summary” of the report, we explored some of the key findings, from key model development to market consolidation. This article takes a look at some of the most telling graphs which help to track the industry’s changing landscape.

Bryan Zhang, Co-Founder and Executive Director of the Cambridge Centre for Alternative Finance explained, “This report is titled ‘Entrenching Innovation’, which is a reflection upon both the historical development and the current state of the UK online alternative finance industry. Online alternative finance has become an ever more established component of the UK financial landscape.”

The 2023 survey was conducted in three phases:

  • “The Funder Survey dataset comprised of 8370 responses across the six models.”
  • An ‘Industry Tracking Survey’, which “collected aggregate-level industrial data used to measure the size and growth of the industry, as well as other key metrics.”
  • “The third phase of research included the collection and analysis of granular-level transaction data from 15 Investment-based and Loan-based Crowdfunding platforms.”

Source: Page 12

As the industry matures, year-on-year growth has continued, despite decelerating in the past two years.

Source: Page 13

Eight out of ten alternative finance models experienced positive annual growth, yet 3 models witnessed negative growth.

Source: Page 18

The alternative finance industry provided £3.3 billion of funding to UK start-ups and SMEs through debt, which provided £2.9 billion to 30,000 companies, equity, which provided £371 million to 482 businesses, and non-investment models providing £14 million of funding.

Source: Page 22

59% of surveyed platforms reported either significantly or slightly changing their business models in 2023, seemingly demonstrating that the year was one of change and innovation.

Source: Page 22

31% of platforms introduced significantly new products in 2023, and 36% of platforms slightly altered their products, suggesting that firms displayed a level of flexibility around their offerings by tailoring their products.

Source: Page 22

Source: Page 23

The term “institutionalisation” was “defined as institutions investing directly through platforms to SMEs and individual platforms.” Despite non-institutional investment (i.e. retail investors) being the driving force in terms of volume, institutional investment contributed towards a substantial amount. As demonstrated, the levels of institutional investment within the alternative finance industry has increased over the years, with institutional investment in equity crowdfunding, for example, up from 8% to 25% between 2015 and 2023.

Source: Page 26

Interestingly, 41% of surveyed platforms deemed a cyber security breach to be a high risk factor, and 36% of surveyed platforms deemed it to be a medium risk factor. Only 6% of surveyed participants listed a cyber-security breach to be a very low risk factor. The collapse of one of more well-known platforms due to malpractice was also deemed to be a very high risk factor by 6% of surveyed platforms, and a high risk factor by 32%.

Source: Page 28

On average, 55% of alternative finance investors use at least two platforms, with peer-to-peer property lending investors lending across two or more platforms (73%), yet equity based crowdfunding investors falling below average (47%).