Alternative Finance Market Expected to Reach $920.9 Billion by 2032—Allied Market Research

According to a new report published by Allied Market Research, titled, “Alternative Finance Market," The alternative finance market was valued at $173.9 billion in 2022, and is estimated to reach $920.9 billion by 2032, growing at a CAGR of 18.5% from 2023 to 2032.

A surge in focus has been witnessed on sustainability in the alternative finance market, with investors and borrowers increasingly looking for opportunities to invest in and borrow from companies that have a positive impact on the environment and society. The alternative finance market has become more integrated with traditional finance, with banks and other traditional financial institutions partnering with alternative finance providers to offer new and innovative financial services to their customers.

Furthermore, alternative finance provides investors with the opportunity to invest in companies and projects that have a positive social or environmental impact, in addition to generating financial returns. The providers are often more flexible and innovative than traditional lenders, which allows them to create new and innovative financial products that can meet the needs of borrowers and investors. Moreover, alternative finance providers often offer greater transparency around fees, rates, and other aspects of their financial products than traditional lenders. This can help to build trust with borrowers and investors. In addition, the alternative finance market is evolving rapidly, driven by changing attitudes toward finance and the increasing use of technology.

Furthermore, the regulatory environment for financial services has evolved in recent years, creating both opportunities and challenges for alternative finance services. In some cases, regulations have created barriers to entry for new alternative finance services. In other cases, regulations have provided a framework for alternative finance services to operate within, creating more trust and stability in the market

Moreover, the global alternative finance market trends is in its developing phase and exhibits high growth potential due to rise in implementation of advanced technologies such as artificial intelligence (AI) and machine learning (ML). In addition, increase in product launches is expected to promote the alternative finance market growth in future. For instance, in June 2022, Sterling Alternative Finance announced the launch of Nigeria’s first ethical investment platform, AltInvest, to offer robust research tools, a wide range of investment opportunities, and competitive returns. The several investment options available on the app are centered on a variety of real industries, including agriculture and real estate, all of which are committed to wealth creation, capital appreciation for investors, and the encouragement of economic activities that promote, growth, and development. Together with real-time portfolio monitoring, seamless investment placement across a range of asset classes, and digitization and automation of investment advising services, the investing app makes several more claims.

By end user, the businesses segment acquired a major market share in 2022. This is attributed to the fact that businesses have become more comfortable with alternative finance and are increasingly turning to these options to access the funding they need. Furthermore, alternative finance provides businesses with a wide range of financing options beyond traditional bank loans, such as peer-to-peer lending, crowdfunding, revenue-based financing, and factoring. Businesses are leveraging this diversity to find the best fit for their financing needs.

Region-wise, Asia-Pacific is expected to grow significantly in alternative finance market during the forecast period. The Asia Pacific region's alternative finance market is growing rapidly owing to a combination of factors such as a large unbanked population, rapidly growing economies, technological innovation, and regulatory support. Furthermore, many governments in the Asia-Pacific have recognized the importance of alternative finance and are taking steps to support its growth. This growth is expected to continue in the future and can be expected to provide further innovation in the alternative finance sector in the region.

The demand for alternative finance has increased considerably during the COVID-19 pandemic. The pandemic has led to changes in consumer behavior, with more people shopping online and using digital payment methods. This has created opportunities for alternative finance providers that specialize in online lending and payment processing. Further, the pandemic has highlighted the importance of social impact investing, with many investors looking for opportunities to invest in companies that are making a positive social or environmental impact. Thus, these factors promoted the growth of the alternative finance industry during the pandemic situation.     

Key Findings of the Study

• By type, the peer-to-peer lending segment accounted for the highest alternative finance market share, in terms of revenue in 2022.
• On the basis of end user, the individuals segment is expected to exhibit the fastest growth rate during the forecast period in alternative finance market.
• Region wise, North America generated the highest revenue of alternative finance market size in 2022.  

The key players operating in the alternative finance market analysis include LendingCrowd, Funding Circle Limited, LendingTree, LLC, Prosper Funding LLC, Fundly, Invoice Interchange Private Limited, Mintos, Indiegogo, Inc., LendingClub Bank, and SoFi. These players have adopted various strategies to increase their market penetration and strengthen their position in the industry.