Recent research throws new light on an old debate. What't future of the crowd – the individual lender or equity investor – in crowdfunding?
The new research comes via Consultancy.uk: "Alternative finance market for SMEs and personal loans, through marketplace lenders, has in the space of just five years, grown from almost nothing to £2.7 billion," reports the agency.
"The rapid rise of the phenomenon may mean that banks need to take care or lose out to a new, more attractive, model. New analysis, however, suggests that it is mainly the current credit environment that makes MPL propositions more attractive than those of banks – an environment that is likely to face change.
"The disruption of traditional business models, through new technologies and digital business models, has the potential to see incumbents rapidly lose market share. One recent area that has garnered attention from analysts is the phenomenon of marketplace lenders (MPLs) providing an easy means for peer-to-peer lending across a range of segments – resulting in a boom in the alternative finance market in recent years.
"While large, corporate players, tend to be able to access debt through capital markets, smaller companies and consumers have traditionally needed to rely on backs to access credit. Banks, are relatively more expensive and risk adverse than the capital markets, which has resulted in more expensive loans for small businesses and consumers.
"In recent years, the development of digital technologies has allowed lenders and borrowers to more easily find one another through MPL services. The MPL services connect lenders with borrowers without themselves, outside of fees and commissions, being responsible for the loans closed between the respective parties.
"In recent years, the phenomenon of MPLs has grown rapidly – jumping from $473 million in such loans across the US in 2011, to almost $22 billion in such loans in 2015. "The CAGR within the industry suggests that a disruptive phenomenon may be unfolding, as total CAGR for the period hit 163.3%. In a new report from Deloitte, titled 'A temporary phenomenon? Marketplace lending', the professional services firm considers whether the peer-to-peer lending market through MPLs is likely to become a disruptive force to the banking industry within the SME and consumer lending segments."
Our own views are clear. We are not averse to institutional money, but we will always value the place of the individual, and seek to preserve the individual's right to participate alongside big, institutional players. See one of several News items on this site, and some of the media reports.