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Alternative Finance: Disruption of Collaboration

"Rather than trying to supplant banking and venture capital, a collaborative model is emerging whereby digital platforms work side by side with traditional investors and financial institutions.

Over the last few years, much has been made of the potential for alternative finance to disrupt the traditional financial industry, including subverting the established bank loan process with P2P lending. Some may wonder if this will actually be the case, and additionally, whether alternative finance as a whole, will disrupt the traditional early stage investment industry.

Thus far, it appears the alternative finance market is actually moving in the opposite direction. Rather than trying to supplant banking and venture capital, a collaborative model is emerging whereby digital platforms work side by side with traditional investors. This trend is evidenced by a number of developments. There is an increasing trend towards investor-led platforms. Such platforms allow individual investors to follow the lead of an accredited investor, showing how traditional financing and alternative financing can work in harmony.

The emergence of a secondary market for private company shares is making it easier than ever for institutions to participate in the space. According to media sources like the Financial Times, even businesses as regulated and traditional as mutual funds are now investing in private companies, such as Uber and Pinterest. Large institutions are starting to utilise P2P lending as well, with the UK’s Metro Bank announcing that it would start lending customer deposits through P2P platform Zopa. Goldman Sachs itself, widely seen as the pinnacle of traditional investment banking, has even announced that it will start lending through a digital consumer-driven platform. All of these points show how rather than disrupting traditional financing models, alternative finance is developing its own collaborative niche within the industry.

Alternative Finance Immediately Addressable Market
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Comments: (1)

A Finextra member
A Finextra member 25 September, 2015, 09:14Be the first to give this comment the thumbs up 0 likes

I think this is too early to draw any conclusion. Possibly this may be a route to bypass regulation or a lure of quick return only time will tell.