New Report on UK Alternative Finance

By Jonathan Lawrence

The Cambridge Centre for Alternative Finance sits within the University of Cambridge Judge Business School and has recently published its 4th UK Alternative Finance Industry Report entitled “Entrenching Innovation”.  The Centre defines alternative finance as financial channels and instruments that emerge outside of the traditional financial system (i.e. regulated banks and capital markets).

The report finds that as market consolidation accelerates there is greater pressure on alternative finance platforms to distinguish themselves through better services and more innovative products, whilst simultaneously responding to emerging regulatory and supervisory demands. Funder research shows that the compositions of the UK retail investor and lender market have been relatively stable over the last two years since the implementation of UK Financial Conduct Authority (FCA) regulations.

The majority of UK loan-based crowdfunding platforms surveyed deemed existing FCA loan-based crowdfunding regulations to be adequate and appropriate with 88% of surveyed platforms stating so. Only 7% of surveyed loan-based platforms thought that existing regulations were too relaxed for their platform activities, while an even smaller percentage of platforms (5%) stated existing loan-based crowdfunding regulations are too stringent.

With respect to UK investment-based crowdfunding which encompasses equity-based crowdfunding but also debt-based securities, 93% of surveyed investment-based crowdfunding platforms saw existing FCA regulation to be adequate and appropriate compared to 7% who deemed existing regulations to be too relaxed and inadequate. No platforms stated that UK investment-based crowdfunding regulation was too excessive or strict.

The collective perceptions of loan-based and investment-based platforms regarding the FCA crowdfunding regulatory review show that the majority of the industry is satisfied with the process with 84% of surveyed platforms consider the review as appropriate and adequate. However, 14% surveyed platforms stated that the FCA’s ongoing crowdfunding review may lead to regulations that are too excessive and strict.

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