Lynn Johannson, Advisor, Sustainability and ESG
January 4th, 2024
Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
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CCAF Releases 2nd Global Alternative Finance Benchmarking Data and Total Fintech Volumes
Crowdfund Insider | | Jun 30, 2021
The Cambridge Centre for Alternative Finance (CCAF) has just released its most recent report providing data on the global alternative finance industry. According to the 2nd Global Alternative Finance Benchmarking Report, this sector of Fintech has grown dramatically – with a caveat: you must exclude the data coming from China.
CCAF defines alternative finance as digital lending and digital capital raising like P2P/marketplace lending as well as investment crowdfunding. Effectively, this sector of Fintech is for online capital formation for both individuals as well as businesses. CCAF also rolls in charity/rewards platforms into the equation.
CCAF is the leading data and research entity covering the global Fintech ecosystem providing much-needed perspective and insight into digital finance. Its benchmarking report is widely referenced and utilized by policymakers around the world to help guide decisions in a highly regulated industry.
See: BIS Research: CBDCs beyond borders: results from a survey of central banks
According to the report, China, once the largest alternative finance market in the world, now barely registers having gone to nearly zero. This is due to a regulatory and policy shift away from this sector of Fintech.
As many people know, China dominated the global online alternative finance market up to around 2018. In 2017, China accounted for 86% of the total market largely from peer-to-peer lending platforms that once numbered in the thousands. The rapid rise of these online lenders was joined by profound reports of fraud. The rapid rise was then followed by a bit of a bust as regulators caught up with the booming market. In 2019, the Chinese market accounted for almost half (48%) of the global volume. In 2020, China accounted for a mere 1% of global activity.
CCAF states that if Chinese volumes are included in the analysis, the total global market volume decreased, falling 42% in 2019 and another 35% in 2020. Or from $304.5 billion in 2018 to $176 billion in 2019 and $114 billion in 2020.
See: CCAF Report: Global COVID-19 FinTech Market Rapid Assessment Study
When you exclude the Chinese market the story is dramatically different. CCAF reports that the global online alternative finance market has grown consistently over the past three years. Ex-China, alternative finance grew 3% from 2018 to 2019 or $89 billion to $91 billion. And in 2020, despite COVID-19, the global market volume rose a further 24% year-on-year to reach $113 billion.
CCAF says the Chinese experience represents:
“… a cautionary tale about both the importance of regulation in market development, as well as the substantial implications of both excessively permissive and excessively restrictive regimes. And so, we do ourselves a disservice if we do not exclude this behemoth outlier when evaluating the impact of Fintech activities on a global context in the longer term. Therefore, it is important to examine the global online alternative finance market more holistically by taking into account the drastic decline of the Chinese P2P lending market over the last two years.”
Today, the USA and Canada are the largest regions when it comes to alternative finance. In 202o, this region generated almost $74 billion. The UK follows with $12.6 billion followed by Asia Pacific (APAC) at almost $9 billion (not including China).
See: McKinsey’s Global Banking Annual Review 2020: A test of resilience
Globally, the top ten segments as defined by CCAF in 2020 are as follows:
- P2P/Marketplace Consumer Lending
- Balance Sheet Business Lending
- Balance Sheet Consumer Lending
- P2P/Marketplace Business Lending
- P2P/Marketplace Property Lending
- Balance Sheet Property Lending
- Invoice Trading
- Real estate Crowdfunding
- Donation-based Crowdfunding
- Equity-based Crowdfunding
A Few Highlights from the report
China dominated the global online alternative finance market up until 2018. However, local market developments and regulatory changes have led to a considerable decline in volumes and its global market share. In 2019, the Chinese market accounted for 48% of the global volume, and in 2020 for only 1%. Accordingly, when Chinese volumes are included in our global analysis, total global market volume has notably decreased, falling 42% in 2019 and a further 35% in 2020 – from $304.5 billion in 2018 to $176 billion in 2019 and $114 billion in 2020.
See: China Says It Remains Open to the World, but Wants to Dictate Terms
When we exclude the Chinese market from our analysis, it emerges that global online alternative finance market has grown consistently over the past three years. Global volumes (excluding China) rose by 3% from $89 billion in 2018 to $91 billion in 2019. And in 2020, despite COVID-19, the global market volume rose a further 24% year-on-year to reach $113 billion.
The largest business model globally in 2019, when excluding China, P2P/Marketplace Consumer Lending remained the largest model type, with a total volume of $33.6 billion, accounting for 37% of the total global volume in 2019. In 2020, though still the largest single model, growth slowed down substantially, accounting for a total volume of $34.7 billion, or 31% of global market share.
When considering the banking status of borrowers, on balance, alternative finance activities remain heavily skewed towards catering for those individuals and customers which are already banked. Crowd-led microfinance, unsurprisingly, is the only exception with 72% of clients categorised as unbanked, and 27% as underbanked.
See: New study reveals environmental footprint of internet activities
Surveyed firms have provided information on the gender distribution of both their funders and their fundraisers. Overall, the percentage of female fundraisers has only slightly increased from 37.8% in 2019 to 38.9% in 2020. However, the percentage of female fundraisers of alternative finance activities in four of seven regions increased from 2019 to 2020: APAC (23% to 24%), Europe (26% to 34%), SSA (47% to 54%), and the UK (47% to 59%). However, activities in the US and Canada (55% to 37%), LAC (43% to 22%) and MENA (34% to 30%) all denoted a decline in the percentage of female fundraisers who utilised online alternative finance.
Continue to the full article --> here
Download the 197 page PDF report --> here
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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