Alternative Financing Market Insights and Growth by 2031
The Alternative Financing market is expected to register a CAGR of 16.7% in 2023–2031. Increased utilization of AI and data analytics and hybrid financing models are likely to remain key alternative financing market trends.
Alternative Financing Market Analysis
The term alternative financing refers to the variety of loan choices available to consumers and company owners other than typical bank loans. In other terms, it is the process of obtaining loans from non-banking or other financial firms that do not hold a complete banking license. Alternative lending has increased dramatically in recent years, as traditional banks have failed to give finance to blue-collar workers, freelancers, and gig workers due to their insufficient credit histories.
Alternative Financing Market Overview
Non-banking organizations are quickly filling the gap by serving the subprime unbanked consumer base. Alternative lenders employ technology to enter a market previously untapped by traditional banking institutions. Furthermore, by offering a huge number of smaller loans, they make a bigger profit. According to an Oracle survey, 40% of retail clients believe that non-bank financial institutions will provide superior investment services.
REGIONAL FRAMEWORK
Alternative Financing Market Drivers and Opportunities
Rise of Technology-Driven Alternative Financing to Favor Market
In recent years, the fintech industry has enabled businesses to convert data into revenues. Fintech startups have impacted traditional banks by relying on technical advancements to better analyze risk. Fintech advancements enabled better data collection. This information assisted in expediting the underwriting process. Furthermore, developments in AI-enabled underwriters to make speedier decisions. All of these combined resulted in speedier loan disbursement and increased client satisfaction. In terms of approval ratings, alternative lenders clearly outperform banks. They can use a broader range of indicators to determine an applicant's creditworthiness. Banks just look at financial statements and prior loan payback records. However, that data is frequently not a reliable indicator of one's financial situation.
Coupling Alternative Financing with Blockchain Technology – An Opportunity in Alternative Financing
The financial markets have seen a remarkable expansion in digital assets over the last decade. Digital alternative finance, a decentralized fundraising strategy, relies on efficient blockchain technology. Digitization has significantly reduced transaction costs compared to traditional financial intermediaries. Blockchain has the potential to lower customer costs, minimize fraud risk, and increase transparency in the financial services industry. Because transactions are recorded on a public ledger, blockchain has the potential to improve financial transparency. Merging blockchain and alternative lending will not only make online lending procedures quicker and more effective, but it can also help the industry expand its potential by facilitating the integration of the ultimate blockchain feature which is decentralization.
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MARKET PLAYERS
Have a question?
Naveen
Naveen will walk you through a 15-minute call to present the report’s content and answer all queries if you have any.
Speak to Analyst
- Sample PDF showcases the content structure and the nature of the information with qualitative and quantitative analysis.
- Request discounts available for Start-Ups & Universities
Alternative Financing Market Drivers and Opportunities
Rise of Technology-Driven Alternative Financing to Favor Market
In recent years, the fintech industry has enabled businesses to convert data into revenues. Fintech startups have impacted traditional banks by relying on technical advancements to better analyze risk. Fintech advancements enabled better data collection. This information assisted in expediting the underwriting process. Furthermore, developments in AI-enabled underwriters to make speedier decisions. All of these combined resulted in speedier loan disbursement and increased client satisfaction. In terms of approval ratings, alternative lenders clearly outperform banks. They can use a broader range of indicators to determine an applicant's creditworthiness. Banks just look at financial statements and prior loan payback records. However, that data is frequently not a reliable indicator of one's financial situation.
Coupling Alternative Financing with Blockchain Technology – An Opportunity in Alternative Financing
The financial markets have seen a remarkable expansion in digital assets over the last decade. Digital alternative finance, a decentralized fundraising strategy, relies on efficient blockchain technology. Digitization has significantly reduced transaction costs compared to traditional financial intermediaries. Blockchain has the potential to lower customer costs, minimize fraud risk, and increase transparency in the financial services industry. Because transactions are recorded on a public ledger, blockchain has the potential to improve financial transparency. Merging blockchain and alternative lending will not only make online lending procedures quicker and more effective, but it can also help the industry expand its potential by facilitating the integration of the ultimate blockchain feature which is decentralization.
MARKET PLAYERS
Alternative Financing Market Report Segmentation Analysis
Key segments that contributed to the derivation of the Alternative Financing market analysis are type and end user.
- Based on the type, the alternative financing market is divided into peer-to-peer lending, debt-based crowdfunding, invoice trading, and others. The peer-to-peer lending segment held a larger market share in 2023.
- By end user, the market is segmented into businesses and individuals. The retail and e-commerce segment held the largest share of the market in 2023.
Alternative Financing Market Share Analysis by Geography
The geographic scope of the Alternative Financing Market report is mainly divided into five regions: North America, Asia Pacific, Europe, Middle East & Africa, and South America/South & Central America.
North America has dominated the Alternative Financing market. Rapid developments in digital platform technology and blockchain technology in North America countries are driving the demand for Alternative Financing in the region. The Alternative Financing market is undergoing substantial development in North America, which can be attributed to the rapid digital transformation in SMEs and DeFi.
Alternative Financing Market Report Scope
Alternative Financing Market News and Recent Developments
The Alternative Financing market is evaluated by gathering qualitative and quantitative data post post-primary and secondary research, which includes important corporate publications, association data, and databases. The following is a list of developments in the market for Alternative Financing and strategies:
- Funding Circle, the leading small and medium enterprise ("SME") loans platform in the UK, US, Germany, and the Netherlands, and Alcentra Limited and Alcentra NY, LLC (collectively "Alcentra Group"), an alternative fixed income specialist for BNY Mellon Investment Management (IM), today announced a strategic partnership to help thousands of small businesses in the United States grow. (Source: Funding Circle Ltd, Press Release, 2024)
Alternative Financing Market Report Coverage and Deliverables
The “Alternative Financing Market Size and Forecast (2021–2031)” report provides a detailed analysis of the market covering below areas:
- Market size and forecast at global, regional, and country levels for all the key market segments covered under the scope
- Market dynamics such as drivers, restraints, and key opportunities
- Key future trends
- Detailed PEST/Porter’s Five Forces and SWOT analysis
- Global and regional market analysis covering key market trends, major players, regulations, and recent market developments
- Industry landscape and competition analysis covering market concentration, heat map analysis, prominent players, and recent developments
- Detailed company profiles
- Sample PDF showcases the content structure and the nature of the information with qualitative and quantitative analysis.
- Request discounts available for Start-Ups & Universities
Report Coverage
Revenue forecast, Company Analysis, Industry landscape, Growth factors, and Trends
Segment Covered
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to segments covered.
Regional Scope
North America, Europe, Asia Pacific, Middle East & Africa, South & Central America
Country Scope
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to country scope.
Frequently Asked Questions
The global Alternative Financing market is expected to grow at a CAGR of 16.7% during the forecast period 2023 - 2031.
The rising number of startups and developing technology and digitalization are the major factors that propel the global alternative financing market growth.
Increased utilization of AI and data analytics and hybrid financing models are anticipated to bring new alternative financing market trends in the coming years.
The key players holding majority shares in the global alternative financing market are LendingCrowd, Funding Circle Limited, LendingTree, LLC, Prosper Funding LLC, and Fundly.
In terms of revenue, the business segment held the major market share in 2023.
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- Data Collection and Secondary Research:
As a market research and consulting firm operating from a decade, we have published many reports and advised several clients across the globe. First step for any study will start with an assessment of currently available data and insights from existing reports. Further, historical and current market information is collected from Investor Presentations, Annual Reports, SEC Filings, etc., and other information related to company’s performance and market positioning are gathered from Paid Databases (Factiva, Hoovers, and Reuters) and various other publications available in public domain.
Several associations trade associates, technical forums, institutes, societies and organizations are accessed to gain technical as well as market related insights through their publications such as research papers, blogs and press releases related to the studies are referred to get cues about the market. Further, white papers, journals, magazines, and other news articles published in the last 3 years are scrutinized and analyzed to understand the current market trends.
- Primary Research:
The primarily interview analysis comprise of data obtained from industry participants interview and answers to survey questions gathered by in-house primary team.
For primary research, interviews are conducted with industry experts/CEOs/Marketing Managers/Sales Managers/VPs/Subject Matter Experts from both demand and supply side to get a 360-degree view of the market. The primary team conducts several interviews based on the complexity of the markets to understand the various market trends and dynamics which makes research more credible and precise.
A typical research interview fulfils the following functions:
- Provides first-hand information on the market size, market trends, growth trends, competitive landscape, and outlook
- Validates and strengthens in-house secondary research findings
- Develops the analysis team’s expertise and market understanding
Primary research involves email interactions and telephone interviews for each market, category, segment, and sub-segment across geographies. The participants who typically take part in such a process include, but are not limited to:
- Industry participants: VPs, business development managers, market intelligence managers and national sales managers
- Outside experts: Valuation experts, research analysts and key opinion leaders specializing in the electronics and semiconductor industry.
Below is the breakup of our primary respondents by company, designation, and region:
Once we receive the confirmation from primary research sources or primary respondents, we finalize the base year market estimation and forecast the data as per the macroeconomic and microeconomic factors assessed during data collection.
- Data Analysis:
Once data is validated through both secondary as well as primary respondents, we finalize the market estimations by hypothesis formulation and factor analysis at regional and country level.
- 3.1 Macro-Economic Factor Analysis:
We analyse macroeconomic indicators such the gross domestic product (GDP), increase in the demand for goods and services across industries, technological advancement, regional economic growth, governmental policies, the influence of COVID-19, PEST analysis, and other aspects. This analysis aids in setting benchmarks for various nations/regions and approximating market splits. Additionally, the general trend of the aforementioned components aid in determining the market's development possibilities.
- 3.2 Country Level Data:
Various factors that are especially aligned to the country are taken into account to determine the market size for a certain area and country, including the presence of vendors, such as headquarters and offices, the country's GDP, demand patterns, and industry growth. To comprehend the market dynamics for the nation, a number of growth variables, inhibitors, application areas, and current market trends are researched. The aforementioned elements aid in determining the country's overall market's growth potential.
- 3.3 Company Profile:
The “Table of Contents” is formulated by listing and analyzing more than 25 - 30 companies operating in the market ecosystem across geographies. However, we profile only 10 companies as a standard practice in our syndicate reports. These 10 companies comprise leading, emerging, and regional players. Nonetheless, our analysis is not restricted to the 10 listed companies, we also analyze other companies present in the market to develop a holistic view and understand the prevailing trends. The “Company Profiles” section in the report covers key facts, business description, products & services, financial information, SWOT analysis, and key developments. The financial information presented is extracted from the annual reports and official documents of the publicly listed companies. Upon collecting the information for the sections of respective companies, we verify them via various primary sources and then compile the data in respective company profiles. The company level information helps us in deriving the base number as well as in forecasting the market size.
- 3.4 Developing Base Number:
Aggregation of sales statistics (2020-2022) and macro-economic factor, and other secondary and primary research insights are utilized to arrive at base number and related market shares for 2022. The data gaps are identified in this step and relevant market data is analyzed, collected from paid primary interviews or databases. On finalizing the base year market size, forecasts are developed on the basis of macro-economic, industry and market growth factors and company level analysis.
- Data Triangulation and Final Review:
The market findings and base year market size calculations are validated from supply as well as demand side. Demand side validations are based on macro-economic factor analysis and benchmarks for respective regions and countries. In case of supply side validations, revenues of major companies are estimated (in case not available) based on industry benchmark, approximate number of employees, product portfolio, and primary interviews revenues are gathered. Further revenue from target product/service segment is assessed to avoid overshooting of market statistics. In case of heavy deviations between supply and demand side values, all thes steps are repeated to achieve synchronization.
We follow an iterative model, wherein we share our research findings with Subject Matter Experts (SME’s) and Key Opinion Leaders (KOLs) until consensus view of the market is not formulated – this model negates any drastic deviation in the opinions of experts. Only validated and universally acceptable research findings are quoted in our reports.
We have important check points that we use to validate our research findings – which we call – data triangulation, where we validate the information, we generate from secondary sources with primary interviews and then we re-validate with our internal data bases and Subject matter experts. This comprehensive model enables us to deliver high quality, reliable data in shortest possible time.
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