Fiserv: SMEs in the UK to Benefit from Growth in Alternative Funding Sources

The alternative finance sector in the UK is expected to grow significantly in the next five years, and this growth will likely benefit the country’s small- and medium-sized enterprises (SMEs), according to a report by financial services technology solutions provider Fiserv.

The report, “Future Trends in U.K. Banking,” explores the changing trends in the banking sector in the country and the increasing importance of alternative finance, especially for SMEs.

One of the alternative sources of funding that has been gaining momentum in the UK is peer-to-business (P2B) lending, which was valued at £850 million in new flows of credit last year, up from £20m in 2011.

Crowd-funding market, an even newer alternate fund source where businesses can raise funds from a group of people or online community, was already worth about £310 million in 2013.

These alternative finance sources will likely be worth £12.3 billion a year by 2020, representing £14,000 loan for each small business applying for credit, the report said.

SMES holds a bright future with total potential P2B lending expected to hit up to £12.3 billion a year.

Though the scale of credit gained by SMEs from alternative finance will substantially grow over the years, traditional banks won’t be affected as the economy will see robust growth over the medium term, thus increasing demand for credit, the study noted.

Travers Clarke-Walker, Chief Marketing Officer, International Group, Fiserv commented, “Our research suggests that improved and user-friendly technology is impelling the growth of alternative finance in the U.K. We have seen the P2B and crowd-funding sectors engaging in a concerted marketing push, which is likely to raise awareness significantly. The buzz around alternative finance for SMEs is giving alternative financers legitimacy and encouraging SMEs to try these alternative funding options.”