US the world’s second largest altfi market

The US is the world’s second largest online alternative finance market behind Mainland China with $36.17 billion in total transaction volume in 2015, a brand new study by the Cambridge Centre for Alternative Finance, the University of Cambridge Judge Business School and the Polsky Center for Entrepreneurship and Innovation at the University of Chicago Booth School of Business (Chicago Booth) reveals.

The US has the highest total online alternative finance market volume per capita in the world at $113.43 in 2015 (China’s per capita volume is $74.54), far higher than the $5.82 achieved in Canada – the second highest in the Americas region.

Focusing on marketplace/P2P lending and crowdfunding activities the study captured an estimated 80% of the visible online alternative finance market (by transaction volumes) in the Americas.

Robert Wardrop, Executive Director at Cambridge Centre for Alternative finance said:

The research team collected data from more than 250 online alternative platforms in the Americas, taking the total number of platforms which participated in our studies to more than 1,000 around the world. The scale and scope of this project was daunting from the outset, and could not have succeeded without the support of our many research partners from across the region.

According to the main findings of the research, in 2015, the Americas online alternative finance industry grew by 212% to $36.49 billion, if compared to the $11.68 billion in 2014.

Marketplace/P2P consumer lending is the largest market segment in the Americas, with $25.74 billion accrued in 2015 while reward-based crowdfunding reached $658.37 million in 2015, narrowly beating equity-based crowdfunding which registered $598.05 million in the Americas.

AltFi Market Share in Americas in 2015. (Source: Breaking New Ground)

Businesses are increasingly tapping alternative finance. In the US, between 2013 and 2015, online alternative finance platforms have facilitated over $10.81 billion worth of growth, expansion, working and venture capital to 268,524 small and medium enterprises (SMEs).

Furthermore, market participation by women is growing even though they appear to be less engaged in equity-based crowdfunding (13% of the total investors).

Interestingly, there is no consensus on regulation as, according to the survey, 51 per cent of US lending platforms and 43 per cent of equity platforms consider current regulations “adequate and appropriate”. However, 34 per cent of equity platforms and 15 per cent of lending platforms see current regulation as too strict or excessive. 40 per cent of lending platforms and 49 per cent of equity platforms in the US, favor the new regulations proposed by the SEC, while around a third of both debt and equity platforms perceive proposed regulations negatively. In Latin America, over three quarters of surveyed platforms perceive there to be no specific regulations in their respective countries.

In this respect, Wardrop pointed out:

In contrast with other markets that we have analyzed, the Americas region stands out for its complexity. This reflects, in part, the region containing the country with the deepest and most sophisticated financial market in the world – and which has a correspondingly complex regulatory environment. But it also illustrates the proficiency of the entrepreneurship ecosystem in this region for the deployment of technological innovation at scale.

Download the report.