Online Alternative Finance Grew 24% in 2020

According to the latest Global Alternative Finance Benchmarking Study report by Cambridge University’s Judge Business School, global online alternative finance volumes grew 24% year-on-year to $113 billion in 2020.

The largest online alternative finance market excluding China is the USA and Canada. Transaction volumes in the USA accounted for 65% of the global market, with a total volume of $73.62 billion. This is followed by the UK ($12.64 billion), Europe excluding the UK ($10.12 billion), the Asia Pacific excluding China ($8.90 billion), Latin America and Caribbean ($5.27 billion), Sub-Saharan Africa ($1.22 billion), China ($1.16 billion) and Middle East North Africa ($0.59 billion).

Business Funding via Online Alternative Finance

Financing volumes from online alternative finance (excluding China) being channelled to entrepreneurs, start-ups, and small and medium-sized enterprises (SMEs) rose substantially in the past few years. A 13% increase year on-year was seen in 2019, with volumes of $35 billion transacted. There was further growth of 51% year-on-year in 2020, with volumes of $53 billion transacted, accounting for 47% of total volumes.

The most utilised funding mode for businesses was Debt-based finance (including lending and invoice trading), accounting for $32.8 billion (96% of all business funding) in 2019 and $49.6 billion in 2020 (94% of all business funding).

APAC Highlights

Regional Volume

Total volume of alternative finance in APAC grew by 55% from 2018 to 2019 and 44% from 2018 to 2020. It facilitated over $18.5 billion in funding during 2019-2020. That is nearly 38% more than the total volume of 2013 to 2018 taken together. There was a small decline of 7% in 2020, likely attributable to the adverse effect of the COVID-19 pandemic on business activity in general.

Customers

According to the Cambridge study, the majority of alternative funding is extended to underbanked businesses. Firms across APAC reported that 51% of their clients were underbanked, with a further 4% unbanked.

Oceanic Adoption Rate

Alternative finance in Oceania was quickly embraced by consumers and businesses early on with a growth of 325% and 427% in 2014 and 2015. This then reduced to a steadier growth rate thereafter. In 2020, there was a small reduction (9%) in volumes which is likely due to lockdowns as a result of COVID-19 with transaction volumes of $1.4 billion.

Market Size

The largest volume by business model for business funding in 2020 was P2P Business Lending ($1.8 billion), followed by Balance Sheet Business Lending ($1.3 billion) and Invoice Trading ($242 million).

The study found that Australia is among the top three APAC countries when it comes to transaction volumes for P2P Consumer Lending, P2P Property Lending, Balance Sheet Business Lending, and Invoice Trading.

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