SHIFTING
PARADIGMS
THE 4TH EUROPEAN ALTERNATIVE
FINANCE BENCHMARKING REPORT
TANIA ZIEGLER, ROTEM SHNEOR,
KARSTEN WENZLAFF, ANA ODOROVIĆ,
DANIEL JOHANSON, RUI HAO, LUKAS RYLL
The Cambridge Centre for Alternative Finance (CCAF) is an international and interdisciplinary research centre based at
the University of Cambridge Judge Business School. It is dedicated to the study of innovative instruments, channels,
and systems emerging outside of traditional finance. This includes, among others, crowdfunding, marketplace lending,
alternative credit and investment analytics, alternative payment systems, cryptoasset, distributed ledger technology
(e.g. blockchain) as well as related regulations and regulatory innovations (e.g. sandboxes and RegTech)
Research Team ................................................ 5
Acknowledgements ......................................... 7
Forewords .......................................................13
University of Cambridge .................................13
University of Agder .........................................14
Invesco ..........................................................15
Executive Summary ........................................16
Introduction ....................................................19
Research Rationale & Objectives ...................19
Methodology ..................................................19
Data Sources .......................................................... 19
Data Collection ........................................................20
Quality Control and Data Handling ..........................20
External Contributions of Practitioner Insight Texts . 21
Chapter 1: The Size and Growth of the
Alternative Finance Market Across Europe .. 22
Total Market Volume ...................................... 22
The Geographic Distribution of Platforms and Market
Volumes .................................................................. 24
Alternative Finance Volume per Capita .................... 28
Alternative Finance Volume per Capita vs. GDP per
Capita ......................................................................30
The Diversity of European Alternative Finance
Models .......................................................... 31
Prevailing Models and Growth in Europe.................32
Country Contributors to Key Models by Volume .....36
The Vitality of Alternative Finance Business
Funding ......................................................... 36
Overall SMEs by Volume and Number .....................36
Split of Debt, Equity and Non-investment based
Models .................................................................... 37
Key Sectors and Industries .....................................38
Market Dynamics by Model ........................... 38
Onboarding, Successful Funding and Repeat Rates 38
Institutionalization and Institutional Agreements ..... 41
European Alternative Finance Developments 44
Innovation ................................................................44
Internationalization ...................................................48
Financial Inclusion .................................................. 52
Perceived Risks .......................................................53
Perceptions Towards Existing Regulation ................54
Regulatory Friendliness and Alternative Finance
Volume per Capita ...................................................55
Chapter 2: Market Snapshots ....................... 57
France ........................................................... 57
Market Volume ........................................................ 57
Volume by Model .....................................................58
Regulation ...............................................................60
Risk ......................................................................... 61
Innovation ................................................................62
Platform Costs and Budget .....................................64
Internationalization ...................................................65
Financial Inclusion ..................................................66
Institutionalization ....................................................66
Germany ...................................................... 67
Market Volume ........................................................ 67
Volume by Model ..................................................... 67
Regulation ...............................................................69
Risk ......................................................................... 70
Innovation ................................................................ 71
Platform Costs and Budget ..................................... 71
Internationalization ................................................... 72
Financial Inclusion ................................................... 73
Institutionalization .................................................... 73
The Nordics ...................................................74
Market Volume ........................................................ 74
Volume by Model and Country ................................ 74
Regulation ...............................................................77
Risk .........................................................................79
Innovation ................................................................80
Platform Costs and Budget .....................................82
Internationalization ...................................................82
Financial Inclusion ..................................................83
Institutionalization ....................................................83
Benelux ......................................................... 84
Market Volume ........................................................84
Volume by Model and Country ................................84
Risk .........................................................................88
Innovation ................................................................88
Platform Costs and Budget .....................................90
Internationalization ...................................................90
Financial Inclusion ................................................... 91
Institutionalization ................................................... 91
Italy ............................................................... 92
Market Volume ........................................................92
Regulation ...............................................................93
Risk .........................................................................95
Innovation ................................................................96
Platform Costs and Budget ..................................... 97
Internationalization ................................................... 97
Financial Inclusion ...................................................98
Institutionalization ....................................................99
CONTENTS
Iberia ...........................................................101
Market Volume ...................................................... 101
Volume by Model and Country .............................. 101
Regulation ............................................................. 103
Risk ....................................................................... 103
Platform Costs and Budget ................................... 104
Innovation .............................................................. 105
Internationalization ................................................. 106
Financial Inclusion ................................................. 107
Institutionalization .................................................. 107
Central Europe ........................................... 108
Market Volume ...................................................... 108
Volume by Model and Country .............................. 108
Regulation ..............................................................110
Risk .......................................................................111
Innovation ..............................................................112
Platform Costs and Budget ....................................113
Internationalization ..................................................113
Financial Inclusion ..................................................114
Institutionalization ...................................................114
The Baltics ...................................................116
Market Volume .......................................................116
Volume by Model and Country ...............................116
Regulation ..............................................................118
Risk ....................................................................... 119
Innovation .............................................................. 121
Platform Costs and Budget ................................... 122
Internationalization ................................................ 123
Financial Inclusion ................................................. 123
Institutionalization .................................................. 124
Eastern Europe ............................................125
Market Volume ...................................................... 125
Volume by Models and Country ............................ 126
Regulation ............................................................. 127
Risk ....................................................................... 129
Innovation .............................................................. 130
Platform Costs and Budget ................................... 130
Internationalization ................................................. 131
Financial Inclusion ................................................. 132
Institutionalization .................................................. 132
South Eastern Europe ..................................134
Market Volume ...................................................... 134
Volume by Model and Country .............................. 134
Regulation ............................................................. 135
Risk ....................................................................... 136
Innovation .............................................................. 138
Platform Costs and Budget ................................... 138
Internationalization ................................................ 139
Financial Inclusion ................................................. 140
Institutionalization .................................................. 140
Appendix A ....................................................142
Appendix B ....................................................143
Endnotes ........................................................144
5
RESEARCH TEAM
TANIA ZIEGLER
Tania is the Lead in Global Benchmarking at the CCAF and manages the Centre’s alternative
finance benchmarking program which spans Europe, the Americas, Asia Pacific, and the
Middle East and Africa. She has authored 15 industry reports since joining the CCAF. She
is an expert on SME finance and also leads the Centre’s work on SME Access to Finance in
LATAM. Tania is a 2010 Fulbright Scholar.
ROTEM SHNEOR
Dr. Rotem is an associate professor at the University of Agder (UiA) School of Business
and Law in Norway and serves as the academic director of the university’s Center of
Entrepreneurship, as well as the head of the Center for Crowdfunding Research. He
holds a PhD in International Management from UiA and a master’s degree in International
Business from NHH Norwegian School of Economics. He has been leading the Nordic
Crowdfunding Alliance of platforms, co-founded and currently serves on the board of the
Norwegian Crowdfunding Association. In addition, he is serving as an affiliate researcher
at the Cambridge Centre for Alternative Finance and is a co-author to its reports. He is a
frequent contributor to policy and strategic discussions with public, government and industry
institutions addressing questions related to crowdfunding. His research includes issues
related to crowdfunding success, behavior and motivations, internet marketing, and cognitive
aspects of entrepreneurship. He has over a decade long track record of teaching, researching
and supporting entrepreneurship and marketing. He has published in academic journals
(including ERD, IJEM, CCM, JBM, JPBM, JPM, etc.), trade magazines and contributed a
number of chapters to research-focused edited books. He is currently editing both a special
issue and a book edited volume on advances in crowdfunding research.
KARSTEN WENZLAFF
Karsten Wenzlaff is an Alternative Finance Researcher and Lecturer at the University of
Hamburg at the Chair for Digital Markets. His research interests are Civic Crowdfunding for
Public Goods, Corporate Crowdfunding, and Regulatory Competitiveness in Crowdfunding
Ecosystems, especially in Central and Eastern Europe through the project Crowdfundport.
Karsten has published reports on the European German Crowdfunding Ecosystems since
2010. He is a member of the European Crowdfunding Stakeholder Forum of the European
Commission. He founded the German Crowdfunding Network and is Secretary-General of the
German Crowdfunding Association. Karsten has an MPhil form the University of Cambridge in
International Relations.
ANA ODOROVIĆ
Ana is a PhD candidate at the Graduate school in law and economics at the University of
Hamburg supported by the German Research Foundation (DFG). Her thesis deals with the
question of overcoming asymmetric information in the crowdfunding market from a law and
economics perspective. In 2018, she was a visiting researcher the University of Oxford and
had an opportunity to present her research on the regulation of crowdfunding in a number of
academic conferences in the field of law and economics and financial regulation. She holds
an LL.M. degree in business law from the Panthéon-Assas University (Paris 2) and a master’s
degree in economics from the University of Belgrade, where she also teaches economics at
the Law school.
6
DANIEL JOHANSON
Daniel is currently a Research Associate at the CCAF and completed his PhD in International
Relations and Chinese Studies at King’s College, London. Prior to this he received his MA,
also from King’s College, London, in Intelligence and International Security. Since joining the
CCAF, Daniel has contributed to and co-authored several of the Centre’s alternative finance
global benchmarking reports.
DATA ANALYTICS
RUI HAO
Dr. Hao is currently working with Cambridge Centre for Alternative Finance as a Research
Associate and Data Scientist. She focuses on big data analysis, machine learning, database
design, statistical modelling and all technology driven projects. She has co-authored several
alternative finance industry reports. She holds a PhD from the Engineering Department at the
University of Cambridge.
LUKAS RYLL
Lukas is a Research Assistant/Data Scientist at the Cambridge Centre for Alternative Finance.
His research focuses on the development of new soft computing methods for financial
forecasting and automated data engineering. Before joining the CCAF, Lukas studied Finance
and Business at WHU – Otto Beisheim School of Management.
7
We would like to thank Invesco and CME Group Foundation for their financial support of this
study.
We also would like to extend our utmost gratitude to our research partners from
the following organizations across Europe who disseminated the survey, including:
Anacofi, Bundesverband Crowdfunding, Wirtschaftskammer Österreich Fachverband
Finanzdienstleister, CrowdFundPort Interreg Central Europe, Crowdstream Interreg Danube
Transnational Program, University of Hamburg, University of Bologna, Arc Romania, Italian
Equity Crowdfunding Association, Brodoto, Centrum Gospodarki Społecznościowej, Interreg
Central Europe, Interreg Danube Transnational Programme, Crowdfund Insider, Crowdfunding
Hub, Lithuanian P2P Lending and Crowdfunding Association, Politecnico di Milano School of
Management, Douw&Koren, Norwegian Crowdfunding Association, UKCFA, Fintech Spain,
Finance Estonia, Financement Participatif France, UNDP AltFinLab, Czech Fundraising Center,
E-zavod, Lend Academy, LendIt, the Swiss Crowdfunding Association, and Crowdfunding
Cloud.
Special thanks go to some partners who walked the extra mile in helping us to ensure good
response from platforms including – Gianluca Quaranta, Ronald Kleverlaan and Dr. Vytautas
Šenavičius.
In addition, we wish to thank Dr. Anna Alon and Dr. Natalia Maehle for their assistance in
translating our survey to Russian for the first time.
We are extremely grateful to our extensive network of research assistants and fellows for their
contribution to the data collection, sanitation and analysis. The data collection would not have
been possible without the incredible work of the CCAF research team, in particular Katherine
Cloud, Rok Piletič, Pei, and Yi Wu.
We would also like to thank Bryan Zhang, Robert Wardrop and Raghavendra Rau for their
counsel and guidance.
Finally, we thank Louise Smith for all her hard work on designing the publication, and Charles
Goldsmith, Kate Belger, and Philippa Coney for their continued support in producing and
publishing this report.
ACKNOWLEDGEMENTS
8
We would like to thank our industry research partners from organizations across Europe who
kindly disseminated the survey and provided much appreciated assistance to our study:
We thank the following alternative finance platforms for participating and contributing to this
study:
9
10
11
12
13
Since 2015, we have released four reports
aimed at understanding the development
and growth of the European online alternative
finance market. This sector has continued
to evolve, creating both new opportunities
and challenges. It has, therefore, never been
more important to understand its evolution
and track the trajectory of its growth.
This year’s report is entitled ‘Shifting
Paradigms’ to emphasize the dynamics
of this still relatively nascent marketplace,
responding to consumer demands as well as
recent regulatory changes.
Overall, the lion’s share of European volume
still originates from the United Kingdom
(68%). However, excluding the UK, the
European online alternative finance market
grew at nearly double the UK’s year-on-year
growth rate – 63% in comparison to 35%.
While this growth was not as strong as in
2016 (101%), there was visible growth in
each sub-region of continental Europe. As a
whole, the market grew by just over €1,300m
to €3,369m in 2017. P2P Consumer Lending
remained the largest market segment for the
fourth year in a row, nearly doubling in annual
transaction volume to €1392.38m.
As in the past, the top three European
markets by transaction volume were France,
Germany and the Netherlands, respectively.
Their share of the overall market has
decreased slightly from 46.5% to 45.6%.
Bulgaria, Poland, and Latvia were among
countries that recorded the fastest year-on-
year growth rates at 781%, 677%, and 274%,
respectively.
The Cambridge Centre for Alternative
Finance is also growing and adapting to
address the research needs of the alternative
finance sector. In the past year alone, we
have published 11 reports covering a wide
array of research topics, from regional
benchmarking studies, alternative SME
financing, and distributed ledger technologies
to regulatory innovation initiatives. We will
continue to work with our collaborators
to collect and analyze empirical data on
both financial and regulatory innovation in
a globally comparative context. We hope
that our research and analysis will inform
business decisions as well as evidence-
based policymaking and regulation.
I would like to particularly thank our
European research partner for this study –
Agder University, as well as our generous
financial supporters Invesco and CME
Group Foundation, who all made this study
possible.
Raghavendra Rau
Sir Evelyn de Rothschild Professor of Finance
Academic Director, Cambridge Centre for
Alternative Finance
Cambridge Judge Business School
FOREWORDS
14
The emergence of alternative finance and
its fast growth in recent years presents both
opportunities and challenges for a wide
array of stakeholders. The ability of those to
assess and address these developments
depends on availability of quality data that
may inform policy making, as well as industry
growth and development.
The University of Agder’s School of
Business and Law is one of Europe’s leading
institutions in taking crowdfunding seriously
as an important aspect of financial access
and inclusion, as well as a potential driver for
entrepreneurial growth. We have committed
to better understanding this emerging
industry in both words and action. Most
recently, this has been through recruiting a
team of researchers for a newly launched
Crowdfunding Research Center. Such
investment is unique on an international
scale, allowing us to offer both novel courses
while conducting leading research in this
field.
We are particularly proud and thankful
for the close cooperation achieved with
the University of Cambridge Centre for
Alternative Finance, and for the close and
collaborative relationships established with
all platforms operating in Norway, as well as
leading platforms abroad.
In this respect, the current report represents
the excellent outcome of intensive
research collaborations with important
impact potential. The message of “shifting
paradigms” is of relevance for the financial
sector, business education and research
sectors. By focusing on important financial
aspects of our ever more digital lives,
we actively contribute to more informed
decision-making as well as the responsible
development of new industries.
The current report is an impressive read
on the current dynamics and operations of
alternative finance in Europe highlighting its
growth trajectories, innovation directions as
well as international scope and impact.
We are grateful for the opportunity to
contribute to this important work and look
forward to ever more ambitious research in
the area.
Dr. Kristin Wallevik
Dean
School of Business and Law
University of Agder
15
This report from the Cambridge Centre
of Alternative Finance and the University
of Agder’s School of Business provides a
glimpse into the growth and permeation of
alternative finance models across European
borders after four years of measurement
with the European benchmarking report.
The report, aptly titled “Shifting Paradigms,”
looks at 45 European countries and 269
platforms across the continent. Europe is an
interesting use case because of the disparity
in economies in such a small geographical
slice of the world; however, findings
show overall strong and steady growth in
alternative finance activity in most countries
indicating that these new models of raising
and distributing capital are experiencing
real-world, tangible benefits that are inspiring
market movements.
While there was overall growth, the rate of
growth seems to have cooled in some more
mature markets. Additionally, some European
regions beyond the UK and historically
stronger European economies have seen
explosive rates of growth in the alternative
finance space. This finding is also supported
by the declining market share in the UK of
total alternative finance activities in Europe.
The paradigm is shifting in a way that favors
technology and models to make capital more
accessible beyond the borders of traditional
finance.
As tokenization technology moves into
more robust testing phases, we are taking
notice of trends in how real estate and
equity-based crowdfunding models are
maturing in European markets. Compared
to other methods of alternative finance,
the market shares are still small from an
overall percentage standpoint, but we
think there are opportunities for even
greater disruption with tokenization on the
horizon. Another area of interest for the
Invesco Technology Strategy Innovation and
Planning team in our mission to innovate for
investment performance is how platforms are
approaching product innovation and applying
research and development. The innovation
focus reported by many is improving
operational efficiency and increasing
automation where possible, a mantra that
can be heard among businesses large
and small, traditional and alternative. With
technology changing at such at rapid pace,
there are many opportunities for innovation
and forming strategic alliances to close
capability gaps and enable new operating
models.
The ongoing regulation and legislation
conversation will continue to influence the
impact and outcomes of the alternative
finance world. Opinions seems split amidst
platform types as to the adequacy and
stringency of regulation across Europe, but
this is also an area we monitor closely as we
push forward on our own strategic path.
We’d like to thank all of the teams and
individuals involved in the gathering and
analysis of the data and the creation of
this report from the Cambridge Centre
of Alternative Finance and the University
of Agder’s School of Business. We look
forward to progress in the world of alternative
finance, and staying abreast of how trends in
alternative finance can impact the decisions
we make in the asset management world
and how we form our strategies and make
best decisions for our clients.
Dave Dowsett
Global Head of Technology Strategy,
Innovation and Planning
Invesco
16
This year’s report is titled ‘Shifting
Paradigms’ to, in part, emphasize the
continued growth and development of the
European Alternative Finance Industry,
but also underscore that these patterns
of growth can develop and change as the
sector continues to develop and mature.
Throughout the region, platforms have
continued to grow, respond to regulation,
and expand operations internationally.
In some regions, model prominence has
shifted, allowing for others to grow. At times,
this has been a response to the development
or lack of regulation, or simply a result of
competing market forces.
Last year’s report, ‘Expanding Horizons’,
sought to exemplify the positive
developments in European Alternative
Finance in 2016 and foreshadowed future
developments in the industry. The sector as a
whole has continued to expand, and across
the board has grown in volume. As with last
year, this study captured market data from
45 European countries, and continued to
explore issues with regard to innovation,
research and development, as well as
internationalization trends.
Key Conclusions:
• This year’s study gathered data from 269
platforms with reported operations in 2017.
These 269 platforms were responsible
for 519 unique data entries across 45
countries in Europe. The study shows
that the total European online alternative
finance market (including the UK) grew
by 36% to reach €10,436m in 2017.
The United Kingdom is still the largest
individual alternative finance market, albeit
with a declining market share from 73%
in 2016 to 68% in 2017. Excluding the UK
from overall volume, the European online
alternative finance industry grew 63% from
€2,063m to €3,369m in 2017. This growth
is slower than in previous years, as in 2016
the market grew 102%. Between 2013 and
2017, the average annual growth rate for
Europe has been 80%.
• France, Germany and the Netherlands
remained the top three national markets
for online alternative finance by market
volume in Europe, excluding the United
Kingdom. The French market reached
€661.37m, followed by Germany (€595.41),
the Netherlands (€279.93m), Italy
(€240.66m), and Finland (€196.76m). The
Nordic countries collectively generated
€449.0m, making them the third largest
regional market in Europe. The next largest
markets were the Benelux countries
(€371.0m), Italy (€241.0m), the Baltic states
(€234.7m), Eastern Europe (€179.2m),
Georgia (€173.3m), Iberia (€169.2m),
Central Europe (€110.1m), Ireland (€106.8),
South Eastern Europe (€45.2m), and
European members of the Commonwealth
of Independent States (CIS) (€32.8m).
• On a per capita basis France and
Germany are ninth and thirteenth,
respectively, which is a clear contrast to
their position in terms of total volume.
Compared with last year, both France
and Germany have a higher position (from
12th and 14th, respectively), potentially as a
result of their strong growth. As with last
year, considerable shifts in overall rankings
between total volume and volume per
capita indicate that even countries with
smaller online alternative finance volumes
may have greater penetration and usage
of these models. In almost every instance,
a high total volume does not necessarily
reflect a strong correlation with per capita
distribution rankings.
• For the fourth year in a row P2P Consumer
Lending accounted for the largest market
share of European Alterative Finance
(excluding the UK). This model accounted
for 41% of all volume and grew by 99.8%
from €697m in 2016 to €1392m in 2017.
Other models accounted for the following
market shares: Invoice Trading (15.9%
of market share), P2P Business Lending
(13.8% of market share), Real Estate
Crowdfunding (7.7% of market share),
and Equity-based Crowdfunding (6.3% of
market share).
EXECUTIVE SUMMARY
17
• Institutionalization across all model types
decreased considerably between 2016
and 2017. This includes funding from
pension funds, mutual funds, asset
management firms and banks. For
example, the percentage of institutions
participating in P2P Consumer Lending
decreased from 45% in 2016 to 12% in
2017. Additionally, 24% of P2P Business
Lending (down from 29%) was funded
by institutions. Invoice Trading saw the
overall percentage of institutional funding
decrease, falling from 68% in 2016 to 22%
in 2017. Additionally, 6% of the investment
in Equity-based Crowdfunding (down from
13% in 2016) was funded by institutional
investors such as venture capital firms,
angels, family offices or funds.
• Online alternative finance for businesses
across Europe continued to grow,
providing €1,660m to over 24,000
businesses. Overall, European business
funding grew by €534m, and raised funds
for an additional 9,586 businesses. Debt
models (including P2P Business Lending,
Invoice Trading, etc.) accounted for 76% of
all business finance, while equity models
accounted for 21%. The top five countries
in terms of business funding were France
(€325m), the Netherlands (€264m), Italy
(€171m), Sweden (€126m) and Germany
(€106m).
• Internationalization of platforms is on the
rise. In 2017, 88% of platforms reported
some level of cross-border inflows, while
61% reported outflows. This represents
a growth of 11% for platforms reporting
cross-border inflows, and 17% growth for
those reporting cross-border outflows.
Despite the increasingly large share of
platforms that have reported some level
of cross-border transactions, most still
indicate low levels of such activities. For
instance, 55% of platforms that have
reported cross-border inflows state that
they only represent up to 30% of their
volumes. Similarly, 45% of platforms
have reported cross-border outflows
representing up to 30% of their volumes.
It is important to note, however, that this
share has grown because in the previous
year most platforms only reported that
these inflows and outflows contributed up
to 10% of volume.
• Despite growth in international orientation
of platforms, the extent of actual
localization of services, interface and
brand remains limited. The most popular
internationalization strategy was having
a global website and brand, with 70% of
P2P Property Lending platforms, 69% of
P2P Consumer Lending platforms, 62% of
Donation-based Crowdfunding Platforms,
58% of Reward-based Crowdfunding
platforms, and 57% of Equity-based
Crowdfunding platforms following such
strategy. This represents a relatively
low threshold investment based on a
globalized view of the market and implies
high levels of standardization.
• While in 2016, models that were
associated with larger volumes reported
a higher level of change to their business
model, the opposite trend was observed
in 2017. For the top five model types
by volume, 50% or more of platforms
reported making no changes to their
business model. Platforms that had
the highest amount of change to
their business model were: Donation-
based Crowdfunding and Real Estate
Crowdfunding. For Donation-based
crowdfunding 69% of platforms made
slight alterations to their model and 12%
made significant changes. For Real Estate
Crowdfunding, 43% of platforms made
slight changes, and 7% made significant
changes. Product innovation, however,
was high across the board. With the
exception of P2P Consumer Lending, 50%
or more of platforms from all model types
reported that they had made significant
changes to their product offerings.
P2P Property Lending (88%), Reward-
based Crowdfunding (67%) and Invoice
Trading (64%) had the highest amount of
significant changes to products in 2017.
• As was observed in the previous year,
most innovation focused on improving
the operational efficiency of platforms
through process streamlining and
automation, as well as optimizing payment
processing and customer verification.
Investments in process streamlining and
automation were particularly common
in P2P Property Lending (100%), Real
Estate Crowdfunding (95%), and Invoice
Trading (85%). Payment processing was
18
reported as an area of focus by 100%
of P2P Property Lending platforms,
86% of Donation-based Crowdfunding
platforms, and 70% of Invoice Trading
platforms. Customer verification was also
reported as an area of focus by 95% P2P
Property Lending platforms, 77% of P2P
Consumer Lending platforms, and 70%
of Invoice Trading platforms. Additionally,
as with last year, the secondary research
focus for platforms in Europe regards
investment and development in customer
service features, predominantly social
media and promotional tools, community
management, and CRM systems.
• In 2017, perceptions of risk were split
amongst model types, with no one clear
risk factor for all platforms. For P2P
Consumer Lending and P2P Business
Lending, ‘Collapse due to Malpractice’
was the highest risk – ranked between
high and very high by 55% and 34% of
model types, respectively. ‘Campaign
Fraud’ was perceived to be the highest
risk by Invoice Trading (73% high to very
high risk), Debt-based Securities (29%),
and Donation-based Crowdfunding (38%)
platforms. The risk of a “Cyber-security
Breach” was perceived as the highest
risk for Equity-based Crowdfunding (40%
high to very high risk), and Reward-
based Crowdfunding (44%). “Changes to
Regulation” was seen by four model types
as the second highest risk, particularly
Equity-based Crowdfunding (37%), P2P
Consumer Lending (30%), Donation-based
Crowdfunding (30%) and Reward-based
Crowdfunding (26%).
• As regulatory regimes across Europe
continue to develop, so to do the
perceptions of platforms on the adequacy
of these regulations. In general, while
overall views are still divided, it appears
that the level of approval has been
increasing. A majority of platforms
operating P2P Business Lending (71%),
Debt-based Securities (67%), P2P
Consumer Lending (63%), Real Estate
Crowdfunding (56%) and P2P Property
Lending (50%) viewed current regulations
to be adequate and appropriate. In
contrast, a large percentage of Equity-
based Crowdfunding (53%), Reward-
based Crowdfunding (43%), and P2P
Property Lending (42%) platforms viewed
regulation to be excessive and too strict.
19
RESEARCH RATIONALE & OBJECTIVES
The fourth comprehensive European
alternative finance benchmarking report
examines the growth and development of the
European Alternative Finance market at both
regional and national levels. As alternative
finance models fundamentally change capital
raising practices across Europe for funder
and fundraiser stakeholders, this report
examines platform operability in detail and
seeks to identify how business models,
innovation directions, and internationalization
strategies are evolving to achieve continued
success.
METHODOLOGY
The following section outlines key
aspects and considerations relating to the
methodological choices in the current study,
including data sources, data collection
procedures, data handling and quality
control.
Data Sources
The primary data reported in the following
pages comes from the Alternative Finance
Industry Benchmarking survey, distributed
annually by the Cambridge Centre for
Alternative Finance. This survey captured
data from active alternative finance platforms
with operations in the region. The list of
platforms was compiled based upon the
following sources:
• List of platforms from previous years
• List of platforms provided by research
partners
• List of additional platforms based upon
desktop research, to include new
platforms not identified in the previous
sources
Overall, the data encompassed by this
study covered 269 platforms that reported
operations across Europe (excluding the
UK) for the 2017 calendar year. These 269
platforms were responsible for 519 unique
entries. Each entry is defined as platform-
country dyad, as some platforms operate
in multiple jurisdictions. This allowed us to
better capture volumes from domestic and
international platforms operating in each
country.
Of the 269 platforms which participated in
this study, 259 are headquartered in Europe,
while 10 platforms are headquartered outside
of Europe. Platforms operating from outside
Europe were primarily based in the United
States, Canada, Israel, Brazil and Japan,
and were predominantly representative of
non-investment models (i.e. reward-based
crowdfunding). When broken down by
country, the dataset covers 45 countries
(including the UK). Focus was made to
ensure the inclusion of all major actors by
model and by country.
The current report was based on the same
number of platforms as those covered in
our previous report. However, this involved
entries from 54 new platforms that did not
participate in the previous year’s survey,
and 54 platforms that participated in the
2017 survey (2016 data), but not in the 2018
survey (2017 data). Seven of these non-
participating platforms ceased operations in
the past year, and 1 reported activities and
volumes only outside of Europe and hence
was excluded from the current report. The
absolute majority of the remaining 46 non-
participating platforms represent very small
platforms that carry no significant impact on
reported volumes. Nevertheless, in the few
cases where platform non-participation led
to a significant impact on reported volumes,
these were reported and clearly indicated
under the relevant regional review sections.
Results of campaigns run independently
and outside of alternative finance platform
activities1 were not included in the results
of this study. Additionally, volumes from
European-based campaigns run on non-
European based platforms2, which are not
included in the 10 platforms mentioned
above, were also not included.
INTRODUCTION
20
Data Collection
The survey consisted of 33 questions,
including both single and multiple
response questions. These questions were
instrumental in gathering self-reported
aggregate-level data relating to platform
operations and performance in 2017. This
year’s survey consisted of five parts covering
questions related to: Fundraisers, Funders,
Platform Structure & Strategy, Risks &
Regulations, and Financial Inclusion.3 The
structured nature of the survey allowed
platforms to provide comprehensive, precise
and cohesive data.
Many of the questions remained the same
as those used in the previous year to ensure
longitudinal analysis was possible, especially
with respect to questions relating to total
transaction volumes, number of funders
and fundraisers, among others. Platforms
were also presented with a series of non-
compulsory questions which built on key
research themes identified in last year’s
report.
In an effort to more accurately attribute
fundraiser volumes, platforms were able
to report model activities and volumes on
a per country basis. This way, firms could
more accurately describe their operations,
especially where activities occurred
outside of their home market. The 2017
dataset provides a snapshot of country-
and model-level activities by platform
as internationalization becomes a more
substantial trend throughout the sector. As
an example, 40.5% of survey responses
came from platforms with two or more
countries of operation within Europe.
Invitations for survey participation were
sent by members of the research team
directly to platforms, published on targeted
social media groups, as well as were
distributed via research partners through
their own independent networks (i.e. industry
associations, partner research institutions,
etc.). Survey invitations were distributed in the
form of personalized email communications,
direct messages via social media and
telephone to platform management. The
research partners were instrumental in
identifying appropriate alternative finance
platforms across the region, promoting the
survey and serving as advisors to the core
research team throughout the research
program. The survey was distributed in
English, French, Spanish, Portuguese
and German. These initial invitations were
followed up utilizing repeated multiple
reminders in a variety of forms between May
2018 through November 2018.
The survey was hosted on a dedicated
site, with submissions accessible only to
the principal investigators of this project.
To complement the survey, web-scraping
was also used to get the most up-to-date
transaction volumes for Europe for a limited
number of key platforms. This was carried
out using widely available Python web-
scraping libraries, devised within the research
center. Once the data set was collected, any
discrepancies such as misattributed volumes
and anomalous figures were cross-checked
through direct contact with the platforms.
Quality Control and Data Handling
Sanitation and verification were conducted
between September 2018 and November
2018. In cases where the survey could not
obtain primary data (or where there were
discrepancies in reported data), the research
team consulted secondary data sets to
inform the research and asked for additional
or clarifying data directly from the platform.
The data used in the previous European
report, ‘Expanding Horizons,’ was also
verified and updated where appropriate.
Throughout the report composition
process, both analyses and write-up were
subjected to repeated peer-reviewing within
the research team. Whenever necessary,
additional external reviews of certain sections
were also enabled to further ensure quality of
reporting.
The research team anonymized and sanitized
data prior to analysis. All personal data was
stripped and securely destroyed from the
database. For all average data points the
team applied weightings by transaction
volume per respondents and significant
outliers were removed. At completion, the
data was encrypted and stored for retrieval
exclusively for the use of this project.
Finally, throughout the analysis process,
explanations are suggested for identified
trends and survey results. Accordingly, and
whenever necessary, abnormal deviations in
21
identified trends vis-à-vis our previous report,
were explained by specific platforms that had
contributed to last year’s research but did
not participate again this year. Here, while the
current report covers more platforms than
in previous years, in a few instances certain
critical platforms chose not to participate this
year, and resulting outcomes are explained
by their non-participation.
External Contributions of Practitioner Insight
Texts
For further insights, deeper understanding
and triangulation across sources, we have
also invited a selected number of external
experts to provide short insight texts, which
complement our independent analysis. Such
texts reflect the contributing practitioner’s
own viewpoints about developments
unravelling in their respective countries and
serve only as supplementary material to
the independent research work by the core
research team.
22
TOTAL MARKET VOLUME
In 2017, alternative finance volumes from
across Europe grew by 36%, from €7.67
billion to €10.44 billion. This figure included
alternative finance volumes from the United
Kingdom, which accounted for 68% of the
overall figure (€7.06 billion).4 Though the
United Kingdom (UK) remained the largest
single contributor to European over-all
volume, it is worth noting that over time the
proportion of the UK’s market share against
the rest of Europe is shrinking. In 2015, for
instance, the UK accounted for 81% of all
European volumes. By 2016, the UK’s market
share shrank to 73%.
Figure 1: European Online Alternative Finance Market Volumes 2013-2017 in €billions
(Including the UK)
€10.0b
€8.0b
€6.0b
€4.0b
€2.0b
€0b
€12.0b
2013
2014
2015
2016
2017
€1.12b
€2.83b
€5.43b
€7.67b
€10.44b
151%
92%
41%
36%
Figure 2: European Online Alternative Finance Market Volumes 2013-2017 in €billions
(Excluding the UK)
€3.5b
€3.0b
€2.5b
€2.0b
€1.5b
€1.0b
€0.5b
€4.0b
2013
2014
2015
2016
2017
€0.33b
€0.60b
€1.02b
€2.06b
€3.37b
82%
72%
102%
63%
€0b
CHAPTER 1: THE SIZE AND GROWTH
OF THE ALTERNATIVE FINANCE MARKET
ACROSS EUROPE
23
When examining these figures at national
level, France, Germany and the Netherlands
have maintained their leading position in
mainland Europe. However, 2017 did present
a mixed picture, where: some European
countries exhibited strong growth either from
relatively large earlier volumes (for example
- Sweden, Italy, Georgia and Belgium) or
from small earlier volumes (for example
- Bulgaria, Slovenia, Russia, Latvia and
Poland); some exhibited a healthy though
more modest growth (for example - Spain
and the Netherlands); while others exhibited
stagnation (for example - Estonia) or decline
(for example – Czech Republic, Greece,
Hungary and Iceland). A more detailed
overview of market development at regional
and country levels is presented in later
sections of this report.
Figure 3: Regional Online Alternative Finance Market Volumes 2014-2017 (€billions)
€350b
€300b
€250b
€200b
€150b
€100b
€50b
€39.54b
€320.90b
€10.44b
€0b
€31.81b
€221.66b
€7.67b
€29.98b
€94.61b
€5.43b
€9.65b
€20.29b
€2.83b
2014
2015
2016
2017
Europe (incl. UK)
Americas (incl. US)
Asia-Pacific (incl. China)
When the total volume figure is adjusted
to remove the UK’s contribution, the total
alternative finance market volume was €3.3
billion in 2017. Notably, volume increased
63% against 2016’s €2.06 billion. In a global
perspective, this growth rate was the highest
regional growth rate globally, as the Asia-
Pacific grew 48% and the Americas grew
26% during the same period.
With our partners, the CCAF conducts a
global benchmarking research program,
tracking alternative finance transaction
volumes on both global and regional levels,
enabling data collected in Europe to be
contextualized globally. Here, the largest
region by volume was the Asia-Pacific, which
was ahead of both the Americas and Europe.
In each region one country accounted for a
substantial proportion of the volume.
In this context, China accounted for over
99% of volume within the Asia-Pacific region.
Overall, the Asia-Pacific region experienced a
4-year average annual growth rate of 145%,
which was largely driven by the Chinese
market; when excluding China, the wider
Asia-Pacific grew by 134%.5
In the Americas, the United States accounted
for 96% of the volume, and grew by a more
modest 26% against the previous year, or
by a 4-year average growth rate of 89%. In
contrast, the Latin America and Caribbean
online alternative finance industry grew
exponentially (160%) against the previous
year, or by a 4-year average growth rate of
146%.6
While Europe is the smallest region in
comparison to the other two, it is noteworthy
that Europe’s per-annum growth has been
far steadier, growing 79% annually on
average between 2013 and 2017.
24
The Geographic Distribution of Platforms and
Market Volumes
This year’s survey captured data on
alternative finance activities in 45 European
countries (including the UK). In the current
report, we captured the growing scope
of international flows of alternative finance
transactions. Accordingly, our analyses
included data from 321 European-based
platforms (including the UK) and 10 non-
European based platforms operating in
various European countries. The table below
shows the extent to which international
activities are prevalent in Europe, with
platforms reporting 276 dedicated operations
in European countries (which are not their
home-country), putting total number of
country level operations of platforms in
Europe at 597, when including the UK, or
520, when excluding the UK.
While there were a handful of instances
where platforms declined to be re-surveyed,
in most instances failure to capture repeat
data stemmed from platform closure. This
was especially true in already established
jurisdictions (i.e. France, Germany) where
previously surveyed platforms either had left
the marketplace altogether, pivoted into more
traditional financial activities or merged with
other platforms within their market.
The geographic distribution of participating
platforms from Europe (excluding the
UK) showed the highest concentration of
platforms in Germany (30 local, 16 foreign,
46 in total), France (36 local, 10 foreign, 46
in total), Italy (34 local, 11 foreign, 45 in total),
Spain (26 local, 13 foreign, 29 in total) and
the Netherlands (24 local, 8 foreign, 32 in
total).
25
Country
2017
Locally-based platform operating in country Foreign-based platforms operating in country Total
UK
62
15
77
Germany
30
16
46
France
36
10
46
Italy
34
11
45
Spain
26
13
39
Netherlands
24
8
32
Austria
11
11
22
Norway
14
7
21
Switzerland
6
13
19
Finland
9
8
17
Sweden
8
7
15
Poland
6
9
15
Denmark
4
11
15
Belgium
4
11
15
Estonia
7
6
13
Lithuania
7
6
13
Latvia
4
6
10
Ireland
4
6
10
Portugal
4
6
10
Czech Republic
3
6
9
Slovakia
2
6
8
Romania
1
7
8
Turkey
3
5
8
Greece
3
5
8
Georgia
 
7
7
Russia
1
6
7
Slovenia
2
4
6
Bulgaria
2
4
6
Ukraine
 
6
6
Malta
1
5
6
Croatia
2
3
5
Iceland
1
4
5
Hungary
 
4
4
Albania
 
3
3
Armenia
 
3
3
Serbia
 
3
3
Kosovo
 
2
2
Macedonia
 
2
2
Monaco
 
2
2
Belarus
 
2
2
Bosnia & Herze-
govina
 
2
2
Moldova
 
2
2
Cyprus
 
1
1
Luxembourg
 
1
1
Liechtenstein
 
1
1
Total (incl. UK)
321
276
597
Total (excl. UK)
259
261
520
Table 1: Number of platforms operating in European countries
26
Interestingly, in some countries with annual
volumes above €10 million, the majority
of platforms were foreign-based, such as
– Romania with 87% of platforms being
foreign-based, 75% of platforms in Slovakia,
73% of platforms in Belgium and Denmark,
as well as 68% of platforms in Switzerland.
After the United Kingdom, the top five
volume-driving countries7 were France
(€661.37m), Germany (€596.81m), the
Netherlands (€281.19m), Italy (€240.66m),
Finland (€196.76m), and Sweden (€196.38m).
(See Appendix 1 for Total Alternative Finance
Volume by Country).8
Figure 4: The Geographical Distribution of
Surveyed Platforms (2017)
Total volume in €m
50+
10-14
40-49
7-9
30-39
4-6
20-25
1-3
15-19
Figure 5: Comparative Market Volumes of
Alternative Finance Transactions in the EU (2017)
Total volume in €m
€7b+
€200-300m
€76-100m
€25-30m
€2.1-5m
€0.21-0.5m
€600-700m
€151-200m
€51-75m
€10.1-15m
€1-2m
Up to €0.2m
€500-600m
€100-150m
€30-50m
€5.1-10m
€0.51-1m
Figure 6: Number of Platforms - Local Platforms vs Total National Volumes - Europe 2017
60
50
40
30
20
10
0
€0m
€100m
€200m
€300m
€400m
€500m
€600m
R² = 0.7004
R² = 0.6999
€700m
Local Platforms in Country
Total Platforms in Country
Linear (Local Platforms in Country)
Linear (Total Platforms in Country)
27
Unsurprisingly, alternative finance volumes
generated in country significantly correlated
with number of platforms operating in
country, both in cases of number of locally
based-platforms and total number of
platforms.
The top three countries by volume (France,
Germany and Netherlands) accounted for
46% of the entire region’s volume (excluding
the UK). While this remains significant, the
same three countries accounted for 47%
in 20169, and 70% in 201510. The increase
in the number of countries captured in the
survey suggests that alternative finance
is becoming more commonplace across
Europe, which is in turn distributing volumes
more widely across the region, especially
toward the Nordic, Baltic and Iberian regions.
Figure 7: Online Alternative Finance Volume by Country 2017 (€millions)
€600m
€500m
€400m
€300m
€200m
€100m
€700m
Fran
ce
€661.37mIta
ly€240.66mPolan
d€142.46m€0m
Ge
rman
y€595.41mGe
orgia
€173.28mFin
lan
d€196.76mIre
lan
d
€106.79mNe
th
erlan
ds€279.93mSpain
€160.48mSw
eden
€196.38mLa
tv
ia
€92.20mBe
lgi
um
Es
to
nia
€90.90m€81.24mDe
nm
ar
k
€43.47mNo
rw
ay
€11.79mSw
itz
er
lan
d
€77.10mCz
ec
h
Re
pu
bl
ic
€26.50mAu
st
ria
€32.92mBu
lga
ria
€10.66mLit
hu
an
ia
€61.31mSl
ov
en
ia
€14.61mRu
ss
ia
€28.44mRo
m
an
ia
€10.33mSl
ov
ak
ia
Po
rtu
ga
l
€10.17m€8.73mFigure 8: Regional Alternative Finance Volumes 2016 - 2017
€600m
€500m
€400m
€300m
€200m
€100m
€700m
Fr
an
ce
€445.4m€661.4mBe
ne
lux
€245.8m€371.0mIb
er
ia
€135.3m€169.2m€0m
Ge
rm
an
y
€321.8m€595.4mEa
st
er
n
Eu
ro
pe
€70.8m€179.2mIta
ly
€127.2m€241.0mCe
nt
ra
l E
ur
op
e
€51.1m€110.1mNo
rd
ics
€322.6m€449.0mGe
or
gia
€102.6m€173.3mBa
ltic
s
€136.1m€234.7mIre
lan
d
€76.8m€106.8mSo
ut
h
Ea
st
E
ur
op
e
€9.8m€45.2mCI
S*
€5.8m€32.8m2016
2017
*CIS=Commonwealth of Independent States European members
28
As a useful analytical framework, this paper
also reviews alternative finance volumes
grouped by their European geographical
regions.11 For instance, when reviewed
together the Nordics (Denmark, Finland,
Iceland, Norway and Sweden) accounted
for just over €449m, Benelux (Belgium, the
Netherlands and Luxembourg) accounted for
€371m and the Baltics (Estonia, Latvia and
Lithuania) accounted for €234m.
In terms of regional growth, all regions
exhibited impressive growth levels when
compared to most industries. The fastest
growth was recorded in South Eastern
Europe (357.7%) and countries in the
Community of Independent States (CIS)
(465%), although from very modest volumes
of just a few million euros in 2016. Strong
growth was also reported in Eastern Europe
(153.2%) and Central Europe (115.5%), from
base levels of a few dozen million euros in
2016. However, the most impressive growth,
when considering base volumes, were
associated with the booming markets in
Germany (85.5%) and Italy (89.5%).
Alternative Finance Volume per Capita
While overall country volume serves as a
significant tracker for European alternative
finance, observing alternative finance market
volumes as a per capita figure allows for a
more nuanced analysis on the development
and impact of alternative finance, adjusting
for country size.
The UK continued to register the highest
alternative finance market volume per capita,
at €107.04 (up nearly €41 from 2015 levels,
and up €21 from 201613 levels), indicating
greater market penetration across the
population.
In mainland Europe, the countries that
reported the highest total volume were not
necessarily the leaders in per-capita terms.
For instance, France and Germany slipped
down to the 9th and 13th spots, respectively,
with per capita volumes of €9.85 and €7.20.
Nevertheless, these countries both boasted
high growth rates, growing 48% in France
and 85% in Germany in terms of volumes per
capita between 2016 and 2017.
The great reformers of Eastern Europe
were also the countries that exhibited some
of the highest volumes per capita. Here,
Estonia, despite presenting stagnation in total
volumes, maintained its second place with
close to €62 per capita. Latvia jumped to
third place, with €47.51 per capita up 243%
from its 2016 volume of €13.86 per capita.
Region
Countries
2016
2017
Growth
1
France
France, Monaco
€445.4m
€661.4m
48.5%
2
Germany
Germany
€321.8m
€596.8m
85.5%
3
Nordics
Denmark, Finland, Iceland, Norway, Sweden
€322.6m
€448.7m
39.1%
4
Benelux
Belgium, Netherlands, Luxembourg
€245.8m
€372.4m
51.5%
6
Italy
Italy, Malta
€127.2m
€241.0m
89.5%
5
Baltics
Estonia, Latvia, Lithuania
€136.1m
€217.4m
59.8%
9
Eastern Europe
Poland, Czech Rep., Slovakia, Hungary
€70.8m
€179.2m
153.2%
7
Georgia
Georgia
€102.6m
€173.3m
68.9%
8
Iberia
Spain, Portugal, Andorra
€135.3m
€170.5m
26.0%
10
Central Europe
Austria, Switzerland, Liechtenstein
€51.1m
€110.1m
115.5%
11
Ireland
Ireland
€76.8m
€106.8m
39.1%
12
South East Europe
Romania, Bulgaria, Greece, Turkey, Slovenia,
Croatia, Bosnia & Herzegovina, Serbia, Montenegro,
Macedonia, Albania, Cyprus, Kosovo
€9.8m
€44.9m
357.7%
13
CIS12
Russia, Belarus, Ukraine, Moldova, Armenia
€5.8m
€32.8m
465.0%
Table 2: Regional Definitions and Volumes 2016-2017
29
Georgia maintained its fourth place with
€46.62 per capita up 69% on 2016 volumes
of €27.58 per capita.
Some countries stuck out with extreme
growth rates due to comparative negligible
volumes in the previous year. These included
Albania up 5960%, Slovakia up 1244%,
Moldova up 875%, and Romania up 786%.
However, despite exceptionally high growth
rates, these still reflected relatively modest
per capita volumes of €0.66, €1.87, €0.1, and
€0.53 in 2017 respectively.
Impressive growth was also evident with
respect to some of the larger markets.
Specifically, Sweden grew 123% to €19.51
Figure 9: Market Volume Per Capita by Country for Europe (€ EUR) 2017
€20
€40
€60
€80
€100
€120
UK
€0
Estonia
Latvia
Georgia
Finland
Ireland
Lithuania
Sweden
Netherlands
France
Switzerland
Belgium
Denmark
Germany
Slovenia
Italy
Poland
Austria
Spain
Czech Republic
Norway
Liechtenstein
€107.04
€61.76
€47.51
€46.62m
€35.70
€22.19
€21.68
€19.51
€16.34
€9.85
€9.11
€7.99
€7.53
€7.20
€7.07
€3.97
€3.75m
€3.74
€3.45
€2.50
€2.23
€2.10
per capita, Switzerland grew 158% to €9.11,
and Italy to €3.97 per capita in 2017.
On the other hand, significant declines
were recorded in three countries, including:
Iceland down 44% to €1.7 per capita mainly
due to limited market size and stringent
financial regulations; the Czech Republic
down 16% to €2.5 per capita due to the
closure of a major local platform; and
Denmark down 51% to €7.5’ correct to
2.50 and 7.53, respectively. In this sense,
the decline in the former two countries
represents real decline, while the decline in
Denmark is superficial and was a result of
missing data.14
30
Alternative Finance Volume per Capita vs. GDP
per Capita
Per capita volumes were plotted against
GDP per capita for each country to provide
another comparative framework. Countries
such as the UK, Estonia, Latvia, Lithuania
and Georgia indicated some of the highest
contributions of alternative finance per
person in contrast to their 2017 GDP (lying
well above the line of best fit). Conversely,
countries like Cyprus, Hungary, Bosnia &
Hercegovina, and Luxembourg all lie well
below the line of best fit, a possible indication
of an underutilization of alternative finance in
these markets versus their potential.
Over the past year, some countries have
moved from below the line of best fit to
above it. Switzerland, Slovakia and Albania,
for instance, have all shifted above this
line, implying the development of a more
sophisticated alternative finance marketplace
in these countries.
It is also interesting to review the make-
up of platform activity in the countries
that lie just above the line of best fit, as
Figure 10: Alternative Finance Volume per Capita vs GDP per Capita (€EUR) 2017
€1,000.00
€100.00
€10.00
€1.00
€0.10
€0.01
€0
€0
€20,000
€40,000
€60,000
€80,000
€100,000
GDP Per Capita
Online Alternative Finance Volume Per CapitaR² = 0.1641
Luxembourg
Netherlands
Norway
Switzerland
Ireland
Iceland
Denmark
Sweden
Finland
UK
France
Italy
Spain
Slovenia
Lithuania
Bulgaria
Armenia
Kosovo
Moldova
Serbia
Albania
Estonia
Latvia
Georgia
Poland
Slovakia
Czech
Republic
Malta
Greece
Portugal
Cyprus
Hungary
Turkey
Ukraine
Macedonia
Croatia
Russia
Romania
Belgium
Germany
Austria
opposed to those below. Countries with
strong P2P Consumer and Business
Lending activities tend to outperform (i.e.
UK, Georgia, Latvia and Estonia), while
countries with strong Non-Investment-
based models, such as Reward-based or
Donation-based Crowdfunding, tend to
underperform (i.e. Norway, Iceland, Malta,
Greece, Luxembourg, etc.). This is not
altogether surprising, as the contributions
per fundraiser/campaign from individual
funders will be lower in a non-investment
focused model. Additionally, regulatory
regimes that might hinder or prohibit
investment-based activities (e.g. P2P
Lending or Equity-based Crowdfunding) can
contribute to underperforming markets. The
regulatory impact will be further discussed in
subsequent sections.
Overall, a simple logistic regression analysis,
suggests that 19.5% of the variance in
alternative finance per capita can be
explained by GDP per capita, as proxy
indicator of economic development in each
country. In this respect, our findings can
be interpreted as indicative that alternative
31
finance is only partially delivering on its
potential for filling financial gaps in less
developed countries versus more developed
countries, at least in the European context.
Here, while this trend may be evident in
Georgia, Albania, Romania and Bulgaria
to a certain extent, it is noticeably absent
in countries like Bosnia & Hercegovina,
Hungary, Macedonia and Ukraine.
THE DIVERSITY OF EUROPEAN ALTERNATIVE
FINANCE MODELS
The European alternative finance market
is relatively diverse, with 13 distinct model-
types operating across the region. The
below table provides a snap-shot of the 2017
working taxonomy, which mirrors that in the
previous European industry benchmarking
surveys as well as those conducted in other
regions.
Alternative Finance Model
Definition
2017
Volume
2017
Market
Share
2017 Ranking
(and Change
in Position)
P2P Consumer Lending
Individuals or institutional funders provide a
loan to a consumer borrower.
€1,392.38m 41%
1
Invoice Trading
Individuals or institutional funders purchase
invoices or receivable notes from a business
at a discount.
€535.84m
16%
2 (1)
P2P Business Lending
Individuals or institutional funders provide a
loan to a business borrower.
€466.60m
14%
3 (1)
Real Estate Crowdfunding
Individuals or institutional funders provide
equity or subordinated-debt financing for real
estate.
€258.75m
8%
4 (2)
Equity-based Crowdfunding
Individuals or institutional funders purchase
equity issued by a company.
€210.93m
6%
5 (1)
Reward-based Crowdfunding Backers provide funding to individuals,
projects or companies in exchange for non-
monetary rewards or products.
€158.80m
5%
6 (1)
Balance Sheet Business
Lending
The platform entity provides a loan directly to
a business borrower.
€94.84m
3%
7 (1)
Debt-based Securities
Individuals or institutional funders purchase
debt-based
€75.20m
2%
8 (2)
P2P Property Lending
securities, typically a bond or debenture at a
fixed interest rate.
€66.57m
2%
9 (2)
Donation-based
Crowdfunding
Donors provide funding to individuals,
projects or companies based on
philanthropic or civic motivations with no
expectation of monetary or material
€53.14m
1.6%
10 (1)
Minibonds
Individuals or institutions purchase securities
from companies in the form of an unsecured
retail bonds.
€29.10m
0.9%
11 (1)
Profit Sharing
Individuals or institutions purchase securities
from a company, such as shares or bonds,
and share in the profits or royalties of the
business.
€1.57m
0.05%
12 (1)
Balance Sheet Consumer
Lending
The platform entity provides a loan directly to
a consumer borrower.
€3.00m
0.1%
13 (1)
Other
The research team recorded volumes raised
through other alternative finance models,
including Community Shares, Pension-led
Funding, crowd-led-microfinance and other
model’s which fall outside of the existing
taxonomy.
€22.42m
0.67%

Taxonomy and Volume
Table 3: 2017 European Taxonomy
32
In 2017, P2P Consumer Lending accounted
for 41% of all European Alternative Finance
volumes, followed by Invoice Trading
(16%), P2P Business Lending (14%), Real
Estate Crowdfunding (8%), Equity-based
Crowdfunding (6%) and Reward-based
Crowdfunding (5%). Platform activities from
these six models accounted for just over
90% of the alternative finance landscape.
Since 2013, the P2P Consumer Lending
model has remained the single largest
volume driver across Europe. In 2017, this
model accounted for a market share of 41%.
While most of the other model activities
present in Europe have maintained their
proportional market share at similar levels
year on year, the P2P Consumer Lending
model has increased its market share from
34% in 2016 to this year’s 41%. It is worth
noting that P2P Consumer Lending was the
largest alternative finance model globally in
2017, driving volumes in the Asia-Pacific and
Americas region. In the case of Asia-Pacific,
the models’ strong market-share position
was driven by P2P Consumer activity in
China (63% of the market).
Over the course of 2017, model rankings in
terms of overall market-share position have
shifted considerably for certain models
against the previous year. Invoice Trading,
for instance, accounted for 12% of 2016’s
European volume and was in third position.
In 2017, this model accounted for 16% of
market share, having nearly doubled against
the previous year and moved into second
position. While Real Estate Crowdfunding
was the sixth largest model type in 2016,
its volume more than doubled in 2017,
and accounted for 8% of the market.
Equity-based Crowdfunding’s total volume
decreased slightly, reducing its share of the
market from 11% in 2016 to 6% in 2017.
An interesting development, countering
trends in other models, was the significant
decrease in Reward-based Crowdfunding.
Total volumes fell 17% between 2016 and
2017 and moved it from being the fifth largest
model in 2016, to the sixth in 2017.
Models that did not perfectly fit under any
existing model type accounted for €22.42m
and were identified as ‘other’ in the above
table.
Prevailing Models and Growth in Europe
In contrast to 2016, where all models
experienced positive growth, just over half of
all models (eight out of the 13 model types)
experienced positive annual growth in 2017.
P2P Consumer Lending continued to
grow, increasing by 99.8% from €697m
in 2016 to €1,392m in 2017. This growth
can be attributed to strong incumbent
firms that have increased their operations
internationally. In 2017, our data set includes
73 distinct P2P Consumer Lending model
entries from 35 firms across Europe, nine
of which operated in two or more countries
(or 26% of firms operating in multiple
jurisdictions).
Invoice Trading grew by 113% between 2016
and 2017, increasing from €252m to €536m.
In 2017, this model recorded 42 entries from
23 firms, with 4 of these firms operating in
2+ countries. This model is closely linked to
that of P2P Business Lending, with six firms
actively operating P2P Business Lending
activities as well. Half of these multi-model
firms are also highly international (2+
country-level operations). Though there are
an increasing number of firms that operate
multiple models, the firms which are driving
volumes in the Invoice Trading segment tend
to only operate within that model.
P2P Business Lending grew 33% from
€350m to €467m. There were 90 entries from
53 unique firms across Europe. Of these 53
firms, 11 (or 21%) had operations in two or
more countries. 69% of firms (37) operated
only one model, while the remaining 31% (16
firms) had activities in related models such
as Consumer, Property or Invoice lending.
In most cases, these 16 firms only operated
one other model.
Real Estate Crowdfunding grew 136%,
increasing from €109m in 2016 to €259m in
2017, generating the fourth largest volume
in Europe. This model recorded thirty-nine
entries from 35 distinct firms. Only three firms
had operations in more than one country.
Despite the impressive growth reported
for this model, volumes of Real Estate
Crowdfunding may still be underestimated,
as some Equity-based Crowdfunding
platforms don’t distinguish between Real
Estate Crowdfunding campaigns and Equity-
based Crowdfunding campaigns on their
platforms.
33
In 2017, Balance Sheet Business Lending
grew to €95m, up 60% against the previous
year. There were ten entries associated
with this model, from seven firms, with one
Figure 11: Alternative Finance Volume by Model in Europe 2015-2017 (€millions)
€200m
€0m
€400m
€600m
€1400m
€800m
€1200m
2017
2016
2015
€1600m
Profit Sharing
€2m
€8m
€1m
Balance Sheet
Consumer Lending
€3m
€17m
Real Estate
Crowdfunding
€259m
€109m
€27m
Balance Sheet
Business Lending
€95m
€59m
€2m
Invoice Trading
€536m
€252m
€81m
Equity-based
Crowdfunding
€211m
€219m
€159m
Debt-based
Securities
€75m
€23m
€11m
Donation-based
Crowdfunding
€53m
€32m
€22m
P2P Business
Lending
€467m
€350m
€212m
Reward-based
Crowdfunding
€159m
€191m
€139m
P2P Property
Lending
€67m
€95m
Minibonds
€29m
€10m
P2P Consumer
Lending
€1,392m
€697m
€366m
firm operating in several jurisdictions. 71%
of these firms only operated one model,
while the remaining 29% had P2P Business
Lending operations as well.
34
The Donation-based Crowdfunding model
continued to grow, increasing 64% to €53m
from 2016’s €32m volume. Although this
model came in tenth in terms of overall
volume rankings, this model has steadily
increased its annual growth rate every
year since 2014. When we look at how this
model has developed outside of Europe, it is
interesting to note that while Donation-based
activities were growing in Europe, they were
declining in almost every other jurisdiction.
Some of this growth may be associated
with shifting campaigns from Reward-based
model to the Donation-based model, as the
latter more frequently allows for a “take what
you get” fundraising approach versus the “all
or nothing” fundraising approach typical of
Reward-based Crowdfunding platforms.
The fastest growth observed across all
models was in Debt-based Securities, up
229% - from €23m in 2016 to €75m in 2017.
There were 18 entries from 14 firms. Though
the model has a smaller number of unique
firm-operators, all of the firms grew year-
on-year. Furthermore, despite this model
having limited multi-European operations,
with only two firms operating in multiple
jurisdictions, it is worth noting that several
of these firms had operations outside of
Europe. Specifically, several Debt-based
Securities firms were servicing fundraisers in
Africa. Those volumes have been accounted
for in the Middle East and Africa dataset and
are reported in the Middle East and Africa
alternative finance report.
The second largest annual growth rate was
observed in the Minibonds model, which
increased by 186% in 2017 - from €10m
to €29m. Eleven firms operated within this
model, with eight firms operating several
alternative finance models. More than half
(55%), also reported having Equity-based
Crowdfunding activities.
Despite being the fifth largest model across
Europe, Equity-based Crowdfunding
shrank by 4% in 2017 – from €218.64m to
€210.93m. Even with this slight decline, this
model had significant platform activity, with
105 unique entries from 66 firms and from 31
countries. Eleven firms (10%) had operations
in two or more countries. Though this model
shrank in 2017, this does not necessarily
mean that this model will not recover in 2018.
Since this model complements traditional
angel and seed-level investment activities,
it is important to view this model within the
broader European VC and PE activities that
went on in 2017. In 2017, while deal size was
on the rise, the number of early stage deals
fell.15 As such, it is not surprising that early-
stage investments across European Equity-
based Crowdfunding models followed similar
trends for 2017.
Reward-based Crowdfunding’s volume
declined by €32m (17%), from €191m to
€159m. This is the first year that this model
has not experienced growth. There were
111 unique entries from 69 firms, with an
additional 73 web-scrapped entries from
2 platforms. Such development may be
explained by a combination of three trends:
first, gradual crowding-out by investment
model platforms which raise higher sums
and have become more clearly regulated
in various jurisdictions; gradual crowding-
out by Donation-based platforms allowing
donation collection for businesses under
the “take what you get” versus the “all or
nothing” fundraising schemes typical of
reward platforms; and, finally, a certain level
of closures of “first mover” Reward-based
platforms following difficulties to achieve
financial sustainability under their current
business and revenue model schemes.
P2P Property Lending’s total volume
decreased by €28m, dropping by 30% to
€67m in 2017. There were 33 unique entries
from 13 firms in 2017. In previous years, this
model was closely related to P2P Business
Lending activities, with firms that were
primarily P2P Business Lenders also offering
property-based loans to business borrowers.
In 2017, the number of firms which were
operating in both models has dwindled, with
those firms re-focusing their activities to
unsecured business lending. This move away
from property-secured lending by firms that
are primarily business lenders helps explain
this decrease, at least in part. An alternative
explanation is that some platforms operating
within the P2P Business Lending sphere
don’t distinguish between P2P Property
Lending and P2P Business Lending in their
operations, essentially distorting reported
figures for these two models. However,
firms that have property-based lending as
their primary activity have increased their
35
transaction volumes against the previous
years. It is likely that the 2018 data set
will reflect stable growth, with dedicated
property firms continuing to grow.
Balance Sheet Consumer Lending, while first
included in this research last year, fell 82%,
from €17m in 2016 to €3m in 2017. Firms with
balance sheet activities primarily operated
as P2P Consumer Lending platforms, with
balance sheet activities supplementing their
P2P offerings. In this case, there were no
reporting firms that operated only a Balance
Sheet Consumer Lending model. Instead,
these firms saw a decline in balance sheet
driven funding, while their overall lending
increased.
Finally, Profit Sharing, which experienced
1449% growth between 2015 and 2016,
declined by 81% in 2017 to €2m. However,
due to relatively small volumes, no clear trend
has yet been identified with respect to this
model.
Figure 12: Top Three Countries by Key Models 2017
€0m
€50m
€100m
€150m
€300m
€250m
€350m
P2P Business
Lending
France
Germany
Netherlands
€88m
€86m
€71m
Reward-based
Crowdfunding
France
Switzerland
Germany
€47m
€26m
€15m
P2P Property
Lending
Estonia
Sweden
Spain
€18m
€18m
€9m
Equity-based
Crowdfunding
Finland
Sweden
France
€51m
€48m
€34m
Donation-
based
Crowdfunding
Germany
Netherlands
France
€19m
€9m
€8m
Debt-based
Securities
France
Finland
Netherlands
€39m
€26m
€5.7m
Balance Sheet
Business
Lending
Netherlands
Austria
France
€62m
€30m
€3m
P2P Consumer
Lending
Germany
Georgia
France
€325m
€293m
€170m
Invoice
Trading
Italy
Belgium
Ireland
€139m
€100m
€73m
Real Estate
Crowdfunding
Germany
Sweden
France
€127m
€67m
€48m
€200m
36
Country Contributors to Key Models by Volume
The chart below identifies the top three
contributors to each model of the key model
types in 2017. Akin to last year, France
appears as one of the top three contributors
for nine of the eleven models, while Germany
appears in five. Additionally, the Netherlands
was also is present in the top three of five of
the eleven models. This result is consistent
with their role in the marketplace, as they are
key drivers of regional volumes.
France was the market leader for the P2P
Business Lending (€88m), Reward-based
Crowdfunding (€46.8m), and Debt-based
Securities (€9m) models. Additionally,
France’s volume contributed the second
largest amount for P2P Consumer Lending
(€293m), Equity-based Crowdfunding (€48m),
Real Estate Crowdfunding (€67m), Donation-
based Crowdfunding (€9m), Balance Sheet
Business Lending (€30m), and Minibonds
(€9m).
While Germany was second to France in
overall volume, it was the market leader for
P2P Consumer Lending (€325m), Real Estate
Crowdfunding (€127m), Donation-based
Crowdfunding (€19m), and contributed the
second highest volume to Reward-based
Crowdfunding (€26m).
The Netherlands was also present in the top
three for key models five times. It contributed
the greatest amount to both Balance Sheet
Business Lending (€62m) and Minibonds
(€20m). It was also ranked second for P2P
Business Lending (€86m) and Debt-based
Securities (€26m), and third for Donation-
based Crowdfunding (€8m).
Of the eleven model types, only three did not
have France, Germany, or the Netherlands as
the top contributor. For these, Italy was the
top contributor for Invoice Trading (€139m),
Estonia for P2P Property Lending (€18m),
and Finland for Equity-based Crowdfunding
(€51m).
THE VITALITY OF ALTERNATIVE FINANCE
BUSINESS FUNDING
Ensuring the vitality of the European
SME sector was viewed as a key priority
throughout the region. Even still, the
development has often been restricted by the
inability to access adequate and appropriate
levels of financing. Over the past few years,
alternative finance has grown to become
a viable funding source for entrepreneurs,
start-ups and small and medium sized
businesses across Europe.
Overall SMEs by Volume and Number
In 2017, 24,107 businesses raised roughly
€1,660m though an online alternative finance
platform.16 In terms of volume, this figure
represented a 47% annual growth compared
Figure 13: Total Online Alternative Business Funding Volumes (Excl. UK) 2012-2017 (€millions)
€1,000m
€1,600m
€800m
€1,400m
€600m
€400m
€200m
€0m
€1,200m
€1,800m
2012
€66m
2013
€117m
2014
€201m
2015
€536m
2016
€1,126m
2017
€1,660m
77%
72%
167%
108%
47%
37
to the 2016 figure. While this is still notable
growth, the growth rate has continued to
decelerate since 2015. Between 2014 and
2015, the growth rate was 167%, which
decreased to 110% in 2016. Overall, the
number of businesses utilizing alternative
finance grew 66% in 2017 (up from 14,521 in
2016). Nevertheless, it is important to stress
that the above figures underestimate the real
contribution of the industry to the financing of
SMEs, as not all platforms monitored and/or
reported these figures.
Split of Debt, Equity and Non-investment based
Models
Platform respondents were able to report
business-fundraiser volumes by model and
A total of €1,605m was generated for
businesses across Europe from debt
and equity models. The remaining 3% of
business funding (€55.26m) came from
non-investment models such as Reward-
based or Donation-based Crowdfunding.
While overall business funding continued to
increase in 2017, the portion derived from
non-investment models decreased by 18%.
Across Europe, lending platforms continued
to account for the majority of the volume
generated, with 76% of all business funding
country. While certain models are inherently
used by businesses to raise funds (i.e.
P2P Business Lending or Equity-based
Crowdfunding), our survey allowed firms
to indicate volumes that went to business
fundraisers, regardless of the over-arching
model type. As such, debt-based business
volumes include applicable volumes from the
following models: P2P Business Lending,
Balance Sheet Business lending, Invoice
Trading, Minibonds, and applicable volumes
from P2P Consumer Lending, P2P Property
Lending, Balance Sheet Consumer Lending
and Debt-based Securities. Equity-based
business volumes came from the following
models: Equity-based Crowdfunding, Real
Estate Crowdfunding, and Profit Sharing.
coming from debt-based models, up from
67% in 2016. This equated to €1,264m in
2017. From 2016 to 2017, overall business
funding from debt-based funding increased
by 68%.
21% of all business volumes (€341m) was
derived from Equity models in 2017. While the
annual growth rate for business funding from
equity models between 2014-2016 remained
in the 90% range, this fell between 2016-
2017 to 12%, while still increasing in absolute
terms by €36.5m.
Figure 14: Debt vs Equity Online Alternative Business Finance 2012-2017 (€millions)
Debt Funding
Equity Funding
€1,000m
€1,600m
€800m
€1,400m
€600m
€400m
€200m
€0m
€1,200m
€1,800m
2012
2013
2014
2015
2016
2017
€60m
€48m
€136m
€83m
€349m
€159m
€754m
€304m
€1,264m
€341m
€18m
€15m
38
France (20%), the Netherlands (16%), Italy
(10%), Sweden (8%), and Germany (6%)
accounted for the top five countries whose
SMEs utilized alternative finance channels to
support their businesses (See Appendix 2 for
business volumes by country).
France had the largest amount of equity-
based business volumes (€113m) and non-
investment-based business volumes (€17m)
in 2017. It is worth noting, the Netherlands
accounted for the largest country in terms of
debt-focused business funding, at €240m in
2017. Ranking third overall, Italy’s business
volume landscape was predominantly from
debt-models (95%), and in particular from
Invoice Trading activities. Sweden, ranking
fourth overall, had significant Equity-based
activities. When we account just for Equity-
based activities, Sweden ranks second
(with €82m). Rounding out the top five was
Germany, with 73% of business activity
stemming from debt activities, 19% from
equity, and 8% from non-investment models.
Ireland, though overall ranked 6th in terms
of business-focused alternative finance
volumes, was the 4th largest when looking
only at debt-based volumes (€106m).
Key Sectors and Industries
A key characteristic of alternative finance
is that fundraising activities are sector
agnostic. With the exception of Property and
Real Estate-focused models, which have
significant and expected concentrations of
firms from the ‘real estate & housing’ sectors,
data suggests that alternative finance
platforms attract diverse firms from a wide
variety of sectors.
Nevertheless, certain models tend to attract
a greater share of business fundraisers
from certain sectors than others. In the
2017 survey, platforms were asked to rank
business sectors as representative of the
largest proportion of successful funding on
their platform.
High sector concentrations were observed
from businesses utilizing the Reward-based
Crowdfunding model, with 35% of volumes
going to businesses in the ‘Cultural and
Creative Industries’ (including - Arts, Music
and Design sectors). This was followed by
‘Media & Publishing’ (12%) and ‘Charity
& Philanthropy’ (8%) ranking 2nd and 3rd
respectively.
Balance Sheet Business Lending saw 28%
of volumes going to firms in the ‘Retail &
Wholesale’ industries, followed by ‘Business
& Professional Services’ (17%) and ‘Food &
Drink’ (10%).
20% of firms that received funding through
an Invoice Trading platform came from
‘Manufacturing & Engineering’, followed by
‘Transport & Utilities’ (12%).
Equity-based Crowdfunding saw 20%
of volumes going to ‘Bio/Medical Tech’
firms, followed by 12% to ‘Environment,
Renewable Energy & Clean-Tech’, and 11%
to ‘Technology Software Developers and
Service Providers’.
Finally, the most sector agnostic model was
P2P Business Lending, with their highest-
ranking sector only accounting for 7% of their
volume, coming from ‘Retail & Wholesale’
firms.
MARKET DYNAMICS BY MODEL
The following pages will focus on how key
stakeholders, funders and fundraisers, utilize
alternative finance.
Onboarding, Successful Funding and Repeat
Rates
Prior to raising funds on an alternative
finance platform, a fundraiser must first go
through a series of checks and assessments
to determine their suitability. While the
process varies from platform to platform,
onboarding and successful funding17 rates
across the key models provide some insight
into how this first checkpoint impacts
fundraiser success. The chart provides these
data points wherever data was sufficiently
robust for analysis.
The Equity-based Crowdfunding model
had the lowest recorded on-boarding rate,
with only 6% of fundraisers able to go on
to the platform to raise funds. Of the 6%
that were onboarded, a staggering 81%
were successful. This suggests that the
more stringent the onboarding process, the
likelihood of fundraiser success increases.
The average campaign size was €214,690.
Real Estate Crowdfunding, another ‘equity-
based’ model also saw high levels of
successful funding (87%) yet onboarding
rates were also quite significant (59%). This
39
may be due, in part, to the fact that most
Real Estate Crowdfunding platforms function
as a SPV (Special Purpose Vehicle/Entity),
doing much of their own deal origination. As
such, their own ‘onboarding’ will be higher,
as these are opportunities which they have
actively sought, in many cases. The average
deal size was €388,608.
Turning to lending models, the onboarding
rate for P2P Business Lending activities
was 17%, with a follow-on 83% successful
funding rate achieved by borrowers. In
coming years, our survey will ask for
an onboarding and successful funding
breakdown as related to secured and
unsecured lending. The average deal size in
2017 was €66,445.
For P2P Consumer Lending, the onboarding
rate was 22% and the successful funding
rate was 29%. When compared to last year,
the onboarding rate decreased (from 25%)
and the successful funding rate increased
(from 19%). Interestingly, as this model relies
more on significant levels of investor auto-
selection, this lower success rate may be
reflective of insufficient investment to support
deal-flow. The average deal size for a P2P
Consumer loan was €8,079 in 2017.
P2P Property Lending denoted an
onboarding rate of 55%, with successful
funding at 98%. This figure is quite
Figure 15: Onboarding and Successful Funding Rates 2017 by Model
100%
80%
60%
40%
20%
0%
88%
Invoice Trading61%
87%
Real Estate Crowdfunding59%
95%
Debt-based Securities21%
66%
Reward-based Crowdfunding47%
83%
P2P Business Lending17%
29%
P2P Consumer Lending22%
98%
P2P Property Lending55%
Onboarding Rate
Successful Funding Rate
Donation-based Crowdfunding74%
69%
Equity-based Crowdfunding6%
81%
interesting, as overall, the volume driven
by this model has decreased. As platforms
operating this model now tend to be solely
focused on property-based lending (where
as last year, platforms were operating hybrid
models), the deal origination and property
specific due diligence has improved with
greater platform specialization. So, while the
model has contracted, specific deals funded
through this model tend to be larger ticket
deal sizes, albeit fewer overall deals, with an
average deal size of €85,066.
The Invoice Trading model recorded an
onboarding rate of 61%, with a successful
funding rate of 88%. It is worth noting
that the proportion of repeat borrowers
to this model is quite high, impacting their
‘onboarding’ rate as firms apply for follow-
on credit. This model also relies heavily on
institutional-led investment, which helps
explain the high success rate.
With respect to Reward-based (47%) and
Donation-based Crowdfunding (74%), both
models noted that their onboarding rate
related more to ‘fundraiser fit’, in cases
where a platform was specifically targeted at
an industry or sector. While the onboarding
rate for Reward-based and Donation-based
models were not similar, the success rates
were much closer - at 66% and 69%,
respectively.
40
With few exceptions, it appears that non-
investment model platforms (i.e. Reward and
Donation Crowdfunding), also enjoy less
regulatory limitations and lower ticket
campaigns, and apply a less rigid filtration
mechanism than investment model platforms
(i.e. Equity, P2P Business Lending, etc.) that
are more heavily regulated and involve
relatively high-ticket campaigns. However,
this practice translates into lower success
rates for non-investment models, which may
be indicative of a certain level of crowd-
wisdom able to differentiate between varying
campaign quality in Reward-based and
Donation-based campaigns.
Another good measurement of fundraiser
alternative finance adoption is the repeat
fundraiser rate. The survey asked firms to
identify the proportion of fundraisers that
Figure 16: Repeat Funding Rate Across Models (2017)
10%
20%
30%
40%
50%
60%
70%
80%
90%
Invoice Trading
0%
P2P Property Lending
Real Estate Crowdfunding
P2P Business Lending
Donation-based Crowdfunding
P2P Consumer Lending
Equity-based Crowdfunding
Reward-based Crowdfunding
82%
37%
25%
21%
18%
17%
15%
12%
were repeat users within a calendar year.
Overall, 82% of the borrowers that utilized
the Invoice Trading model were repeat
borrowers. Compared to last year, the
number of repeat borrowers has continued
to increase (up from 60%). Borrowers are
using this model more akin to a revolving
line of credit, and as a tool for managing
cashflows, than one-off invoice factoring.
This higher repeat rate also helps explain the
higher ‘onboarding-rate’ for this model.
37% of P2P Property Lending borrowers
were repeat users, while only 21% of P2P
Business Lending borrowers and 17% of P2P
Consumer Lending borrowers were repeats.
Repeat fundraisers accounted for 25% of all
Real Estate Crowdfunding issuers, and 15%
of Equity-based Crowdfunding issuers.
Figure 17: Proportion of Auto-Selection by Models (2017)
10%
20%
30%
40%
50%
60%
70%
80%
90%
0%
P2P Consumer Lending
P2P Property Lending
Invoice Trading
P2P Business Lending
Real Estate Crowdfunding
82%
67%
59%
25%
3%
41
Turning now to funder dynamics, our survey
also probed platform respondents to indicate
the proportion of investors or lenders who
used auto-bid or auto-selection mechanisms
to facilitate their investments. Auto-bid or
auto-selection is a function offered by many
alternative finance platforms, where individual
lenders or investors specify investment
amount, duration and risk appetite and the
platform allocates funds across available
investment options based upon the pre-set
preferences, effectively auto-diversifying
against the available portfolio. However, since
such services are heavily regulated only a
subsample of properly authorized platforms
employ such a model.
In 2017, P2P Consumer Lending utilized
auto-bid or auto-selection functions the
most, at 82%. One of the key reasons for
platforms offering this investment option
is to improve market efficiencies regarding
fulfilment. In this case, both the lender and
borrower know their applicable interest rate
with greater certainty, leading to a quick
fulfilment and draw-down of the desired loan.
Yet, as noted in a previous section, 29% of
borrowers are successful on such platforms.
This may suggest that there is insufficient
funding to support borrower demand.
P2P Property Lending (67%) also registered
a high-level of auto-selection usage, followed
by Invoice Trading (59%). Unlike previous
years, P2P Business Lending saw auto-
selection drop to 25%, from last year’s 49%.
The Real Estate Crowdfunding model had
very low usage of auto-selection (3%).
Institutionalization and Institutional Agreements
As alternative finance becomes more
mainstream, it is not surprising that
institutional investors (including pension
funds, mutual funds, asset management
firms, family offices and banks) have taken
greater interest in capital raising fintech
solutions to support their own investment
strategies or support their clients. In 2017,
€452 million originated from institutional
investors, representing roughly 13% of all
European Alternative Finance volumes for the
year.
Though the nominal value of institution-led
investment has increased in 2017, when we
observe the proportions of institutional vs
retail investment by model, 2017 is actually
characterized by retail-led volumes. In fact,
across every observed model, the proportion
of investment from an institution fell, in some
cases quite dramatically.
The proportion of institutional investment
in the P2P Consumer Lending model
dropped from 45% to 12%, accounting
for €161.84m of its total volume. For P2P
Business Lending, institutional investment
accounted for €110.27m its volume,
representing 24% of its total. This represents
a smaller decrease of 5% from 2016’s 29%.
Institutional participation in Invoice Trading
also decreased considerably in 2017, from
63% to 46% and accounted for €248.89m of
the model’s volume.
Institutional investment fell in the Equity-
based Crowdfunding model by over 50%,
from 13% in 2016 to just 6% in 2017.
Overall, institutions contributed €12.17m in
comparison to the €198.75m raised through
non-institutional investors.
While 9% of funding for Real Estate
Crowdfunding came from institutional
investors in 2016, this fell to 2% in 2017. P2P
Property Lending’s share of volume derived
from institutional investors experienced an
even sharper decrease, falling from 46% to
1%.
This development may suggest that, at least
in the European context in 2017, alternative
finance indeed lives up to its name as an
alternative channel for finance, enlarging
the circle of participants in investment and
startup support activities, which have been
underserved by more traditional channels.
Proportions of institution-driven volumes
were more prominent in certain jurisdictions.
45% of Italy’s alternative finance volume
(€109.6m) came from institutional investors,
followed by Ireland with 43% of volumes
(€45.5m) derived from institutional investors.
This was predominantly from the Invoice
Trading model.
The Nordics (21%) and Benelux (20%)
also saw considerable volume driven by
institutional investors, predominantly in debt-
based models. Even though the Nordics
came in third in terms of proportion of
institutional investment, it was the second
largest overall volume driver after Italy, at
€96m.
42
Figure 18: Percentage of Institutional Funding Across Key Models in 2017 (Weighted)
Non-Institutional
Institutional
€0m
€200m
€400m
€600m
€1400m
P2P Business
Lending
72%
28%
2015
24%
76%
2017
71%
29%
2016
Invoice
Trading
63%
2015
46%
54%
2017
32%
68%
2016
37%
Real Estate
Crowdfunding
98%
2017
91%
2016
9%
2%
€1200m
€800m
P2P Consumer
Lending
74%
26%
2015
12%
2017
55%
45%
2016
88%
Equity-based
Crowdfunding
90%
2015
94%
2017
87%
2016
6%
13%
10%
P2P Property
Lending
99%
2017
54% 46%
2016
1%
Figure 19: Percentage of Institutional Funding by Regions in 2017 (Weighted)
Non-Institutional
Institutional
€0m
€100m
€200m
€500m
€300m
€600m
€400m
€700m
Ireland
57%
43%
CIS
1%
99%
South Eastern Europe
10%
90%
France
6%
94%
Germany
5%
95%
Nordics
21%
79%
Benelux
20%
80%
Italy
45%
55%
3%
Baltics
97%
5%
Eastern Europe
95%
1%
Georgia
99%
18%
Iberia
82%
6%
Central Europe
94%
43
Iberia, and in particular Spain, registered
18% institutional volume, followed by South
Eastern Europe at 10%.
France and Germany, the lead countries,
registered considerably lower proportions
of institutionalization in 2017, at 6% and 5%
respectively. Just under €40m was attributed
to France’s alternative finance volumes
from institutional investors, while Germany’s
institutional investment was €30m. The
remaining seven regions had even lower
levels of institutional involvement – all
reporting 6% or lower.
Other Collaborations with Institutional Partners
While institutional investment certainly is
an important marker in understanding the
synergies between traditional financial
services and alternative finance platforms,
it is also important to review the types
of collaborative arrangements that exist
between platforms and traditional financial
institutions. To this end, platforms were
asked about the ways in which they
collaborate with such partners. These
included referral agreements, data exchange,
agent banking, platform ownership and
custodianship.
Platforms in every model indicated having
referral agreements in place, with the highest
instances of this from the Balance Sheet
Business Lending model (86% of platforms).
34% of firms from P2P Business Lending
also indicated having referral agreements in
place, followed by 23% of Invoice Trading
firms, 14% from P2P Consumer Lending
and 12% from P2P Property Lending.
Qualitative remarks indicate that these
referral agreements were predominantly
between the alternative finance platform
and a partner bank. Furthermore, 35% of
Equity-based Crowdfunding platforms also
indicated having referral agreements in place,
though these were predominantly between
the platform and a traditional VC or Angel
Network.
In light of PSD2 and the continuing
conversation around open banking, it was
suspected that more platforms would have
data-exchange arrangements in place in
2017. Yet, instances of such agreements
were quite varied across models. For
instance, only 6% of platforms from the P2P
Business Lending model indicated having a
data-exchange collaboration or arrangement
in place. This was even less for P2P
Consumer Lending (3%) and P2P Property
Lending (4%). In contrast, 11% of Equity-
based Crowdfunding firms indicated having
such arrangements in place.
Platform ownership was most prevalent in
the Reward-based crowdfunding model,
where 30% of platforms answering this
question indicated ownership by institutional
partners. No institutional partner ownership
was seen in P2P Consumer or P2P
Property models, this may indicate that
such organizations view platforms more as
a competitor than a potential collaborator.
Nevertheless, 15% of platforms in the P2P
Business lending and 30% of platforms in
the Debt-based Securities spheres, indicated
that institutional partners consider alternative
finance platforms as a channel for them
to engage in such segments, which may
represent higher risk than they have followed
in recent years, without fully incorporating
such risk under their corporate brands and
organization.
When we review institutional collaborations
by country, platforms from Ireland (67%),
Belgium (62%) and Switzerland (62%) had
the most instances of Referral Agreements
in place with an institutional partner.
France and Germany, despite low levels
of institutional investment (as proportion of
their volume), saw significant instances of
institutional partnership in the form of referral
agreements, at 48% and 37% respectively.
Italy, whose institutional investment volumes
were quite significant, saw 47% of firms
engaging in referral agreements with
institutions.
With respect to platform ownership by
institutional partners, we see that 15-20%
of platforms operating in Western Europe
report such ownership, while the same is
only reported by 4-8% of platforms in Baltic,
Central and South East Europe. No platform
operating in Eastern Europe and the CIS
reported ownership by institutional partners.