July 26, 2016
Over the years of growth and development of the financial technology market (and alternative financing, in particular), the eyes of the professional community have usually been fixed on two regions – the Americas and Europe. However, the chain of meaningful events and rapid transformation across segments in the financial technology industry led to a tectonic shift in the distribution of financial and innovative power and now, if there is one region that leads the world into the next generation of financial technology innovation, it is Asia.
Despite common belief spread by media coverage that the western world is the primary source of growth of financial technology businesses, a wide range of economists and businessmen believe that Asia is a major and underestimated force in the world of FinTech innovation. According to some estimations, investors poured $4.5 billion into FinTech companies in Asia in 2015, which is three times the amount attracted by their peers in Europe. The estimation shouldn't really come to surprise as two out four world's financial centers are in Asia – Hong Kong and Singapore. There are many more reasons why Asia might be dominating the world of financial technology in the nearest future, but a particular segment worth emphasizing due to explosive growth is alternative financing.
Earlier this year, the University of Cambridge, Tsinghua University and the University of Sydney in collaboration with other notable partners, published a report called ‘Harnessing Potential: The Asia Pacific Alternative Finance Benchmarking Report,’ highlighting the hallmarks of the biggest alternative financing market in the world with tremendous opportunities.
Reported data suggests that China is the world’s largest online alternative finance market by transaction volume, registering $101.7 billion in 2015, which is almost 99% of the total volume in the APAC region.
For comparison, the total size of the UK online alternative finance market was $4.5 billion for the same year – 22 times less than China’s market.
The growth rate of alternative financing market in the country is equally impressive – it has grown from $5.56 billion in 2013 to $24.30 billion in 2014 and then went on to reach $101.7 billion in 2015, which constitutes an average growth rate of 328% between 2013 and 2015.
Marketplace/peer-to-peer consumer lending is the largest market segment in China with $52.44 billion lent, followed by marketplace/peer-to-peer business lending ($39.63 billion) and real estate lending ($5.51 billion), the report suggests.
Online invoice trading hit $1.46 billion, equity-based crowdfunding recorded $948.26 million and reward-based crowdfunding rose to $829.52 million in 2015.
Aside from China’s massive alternative financing market, the rest of the APAC region reached a volume of $1.12 billion in 2015 with a 313% YoY growth rate from the $271.94 million raised in 2014.
Outside China, New Zealand is reported to have the highest alternative finance volume per capita – $59.37, followed by Australia ($14.83), Singapore ($7.27), Japan ($2.83) and Hong Kong ($1.28). China’s alternative finance market volume per capita stands at $74.54 in 2015.
In total volume, however, it is worth emphasizing that Japan’s online alternative finance market was able to reach $360.23 million in 2015, followed by $348.37 million of online loans originated in Australia, $267.77 million in New Zealand, $41.18 million in South Korea, $39.91 million in India and $39.76 million in Singapore.
In terms of prevailing market segments outside of China, marketplace/P2P business lending was the largest with $355.51 million, followed by market/P2P consumer lending ($326.22 million), balance sheet business lending ($120.62 million), invoice trading ($116.95 million), reward-based crowdfunding ($81.22 million) and equity-based crowdfunding ($64.13 million).