The online alternative finance market, including crowdfunding and peer-to-peer lending, is exploding in the US, generating more than $36 billion in funding in 2015, up from $11 billion in 2014, according to a new report published by KPMG, the Cambridge Centre for Alternative Finance and the Polsky Center at the Chicago Booth School of Business.
The report, which collected data from more than 250 online alternative platforms in the Americas, found that marketplace/P2P consumer lending is the largest market segment in the US, responsible for more than $25 billion in 2015 and a total of $36 billion from 2013-2015. US Businesses are also increasingly tapping into alternative finance to the tune of $6.8 billion in 2015.
In addition to consumer and business funding, the report also found that real estate models are scaling rapidly, generating nearly $1.3 billion in 2015.
And while some commentators are predicting an industry contraction, the scale of insititutional interest in the market shows no sign of cooling off, with over 72% of marketplace/P2P business loans and 53% of marketplace/P2P consumer loans funded by institutional investors between 2013 and 2015.
This level of institutionalisation stands in contrast to the UK market, where funding is primarily provided by retail investors.
Algorithmic technology, transparency and customer centricity, as well as new definitions of creditworthiness are seen as game-changing drivers of transformation in the online lending marketplace.
Fiona Grandi, national leader for fintech, KPMG, says: “These changes are permanent benchmarks that banks must now rise up to meet. The pace of disruption is sure to accelerate, forging the need and appetite for collaboration among incumbents and non-bank innovators. You may argue whether today’s unicorns will be here tomorrow; however, the shift towards the digital bank is indisputable.”