Alternative finance

Alternative finance refers to financial channels, processes, and instruments that have emerged outside of the traditional finance system such as regulated banks and capital markets.[1][2] Examples of alternative financing activities through ‘online marketplaces’ are reward-based crowdfunding, equity crowdfunding, revenue-based financing, online lenders, peer-to-peer consumer and business lending, and invoice trading third party payment platforms.[3]

Alternative finance instruments include cryptocurrencies such as Bitcoin, SME mini-bond, social impact bond, community shares, private placement and other ‘shadow banking’ mechanisms. Alternative finance differs to traditional banking or capital market finance through technology-enabled ‘disintermediation’,[4] which means utilising third party capital by connecting fundraisers directly with funders, in turn, reducing transactional costs and improve market efficiency.[5]

Alternative finance has grown into a considerable global industry in recent years following the financial crisis according to various reports, particularly for small and medium enterprises.[6][7] For instance, the European online alternative finance market is estimated to have reached nearly €3bn in 2014[8] and is projected to reach €7bn in 2015.[9] For the United Kingdom, according to the University of Cambridge and Nesta, the UK online alternative finance market reached £1.74bn in 2014.[10] In comparison, the alternative finance markets in France and Germany reached €154m[11] and €140m[12] respectively in 2014.

Alternative finance activities such as equity crowdfunding and peer-to-peer lending are now regulated by the Financial Conduct Authority in the United Kingdom from 1 April 2014.[13] Peer-to-peer lending investment will be eligible for an Innovative Finance ISA from 2016.[14] In the US, under the Title II of the JOBS Act, accredited investors are allowed to invest on equity crowdfunding platforms from September 2013.[15] The SEC then announced the updated and expanded Regulation A mandated by the Title IV of the JOBS Act to allow non-accredited investors to participate in equity crowdfunding.[16]

References

  1. ^“Cambridge Judge Business School: Cambridge Centre for Alternative Finance”. Jbs.cam.ac.uk. Retrieved 2015-07-24.
  2. ^Schueffel, Patrick (2017). The Concise Fintech Compendium. Fribourg: School of Management Fribourg/Switzerland. ISBN 978-2-940384-44-0. Archived from the original on 2017-10-24. Retrieved 2018-02-18.
  3. ^“The Rise of Future Finance” (PDF). Nesta.org.uk. Archived from the original (PDF) on 2015-02-26. Retrieved 2015-07-24.
  4. ^“Crowdfunding: Disintermediated Investment Banking by Brian J. Rubinton :: SSRN”. Papers.ssrn.com. doi:10.2139/ssrn.1807204. SSRN 1807204.
  5. ^“The Future of Financial Services” (PDF). Weforum.org. Retrieved 2015-07-24.
  6. ^“Ripe for the picking : A guide to alternative sources of finance” (PDF). Cbi.org.uk. Retrieved 2015-07-24.
  7. ^“Global insights from regional Alternative Finance studies”(PDF). home.kpmg/uk/en/home.html. Retrieved 2019-03-07.
  8. ^Harriet Agnew (2015-02-23). “European market for online alternative finance surges”. FT.com. Retrieved 2015-07-24.
  9. ^“Moving Mainstream” (PDF). Jbs.cam.ac.uk. Retrieved 2015-07-24.
  10. ^“Understanding Alternative Finance” (PDF). Nesta.org.uk. Archived from the original (PDF) on 2015-05-20. Retrieved 2015-07-24.
  11. ^“Crowdfunding in Deutschland wenig verbreitet – SPIEGEL ONLINE”. Spiegel.de. 2015-02-20. Retrieved 2015-07-24.
  12. ^“L’essor du prêt en ligne booste la finance participative en Europe”. Lemonde.fr. 2015-02-23. Retrieved 2015-07-24.
  13. ^“A review of the regulatory regime for crowdfunding and the promotion of non-readily realisable securities by other media”(PDF). Fca.org.uk. Retrieved 2015-07-24.
  14. ^“Including peer-to-peer lending in the new innovative finance Isa will provide boost for millions of Brits | City A.M”. City A.M. 2015-07-09. Retrieved 2015-07-24.
  15. ^“Jumpstart Our Business Startups (JOBS) Act”. SEC.gov. Retrieved 2015-07-24.
  16. ^“SEC Adopts Rules to Facilitate Smaller Companies’ Access to Capital”. SEC.gov. 2015-03-25. Retrieved 2015-07-24.

Ofer Abarbanel – Executive Profile

Ofer Abarbanel online library

Ofer Abarbanel online library

Ofer Abarbanel online library