What are the latest figures on the alternative finance market’s size and projected CAGR?
The alternative finance market size has grown exponentially in recent years. It will grow from $260.65 billion in 2024 to $316.25 billion in 2025 at a compound annual growth rate (CAGR) of 21.3%. The growth in the historic period can be attributed to the rise of online platforms and social media, increasing adoption of peer-to-peer lending, increasing use of cryptocurrency and blockchain, rise in sustainability and green finance, and rise of embedded finance.
The alternative finance market size is expected to see exponential growth in the next few years. It will grow to $676.67 billion in 2029 at a compound annual growth rate (CAGR) of 20.9%. The growth in the forecast period can be attributed to the rising number of technology-driven lenders, growing adoption of decentralized finance, increasing application of artificial intelligence, growing popularity of initial coin offerings, and growing microfinance activities. Major trends in the forecast period include technological advancements, utilization of AI and data analytics, rise in adoption of internet-of-things, and blockchain-based alternative lending platforms.
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Which Market drivers have played a significant role in driving the alternative finance market?
The increasing number of small and medium-sized businesses is expected to propel the growth of the alternative finance market going forward. Small and medium-sized businesses (SMBs) are companies whose size falls within specific parameters regarding number of employees, annual revenue, or assets. The growing number of small and medium-sized businesses (SMBs) is due to several factors, such as crowdfunding, peer-to-peer lending, tax benefits, and business development programs. Alternative finance helps small and medium-sized businesses (SMBs) by providing diverse and accessible funding options that address some of the limitations and challenges of traditional financing methods. For instance, in October 2023, according to the Department for Business and Trade, a UK-based government department, the number of small and medium-sized businesses (SMBs) grew from 5.50 million in 2022 to 5.54 million in 2023. Therefore, the increasing number of small and medium-sized businesses drives the growth of the alternative finance market.
What are the key segments within the alternative finance market?
The alternative finance market covered in this report is segmented –
1) By Type: Peer-To-Peer Lending, Crowdfunding, Invoice Trading, Other Types
2) By Business Model: Traditional Lending, Alternate Marketplace Lending
3) By End User: Enterprise, Individuals
Subsegments:
1) By Peer-To-Peer (P2P) Lending: Consumer P2P Lending, Business P2P Lending, Real Estate P2P Lending, Marketplace Lending
2) By Crowdfunding: Equity Crowdfunding, Reward-Based Crowdfunding, Donation-Based Crowdfunding, Debt Crowdfunding
3) By Invoice Trading: Invoice Factoring, Invoice Discounting, Supply Chain Financing, Reverse Factoring
4) By Other Types: Revenue-Based Financing, Equity-Based Financing, Asset-Backed Lending, Cryptocurrencies And Blockchain-Based Financing, Initial Coin Offerings (ICOs), Venture Debt Financing
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Which key players are shaping the alternative finance market?
Major companies operating in the alternative finance market are PayPal Holdings Inc., Rocket Mortgage, Bread Financial Holdings, Coinbase Global Inc., Social Finance Inc., Affirm Inc., LendingClub Corporation, OnDeck Capital Inc., Fiverr International Ltd., Betterment Holdings Inc., Funding Circle Holdings plc, Prosper Marketplace Inc., RateSetter, Wealthfront Corporation, OurCrowd Ltd., Freelancer Technology Pty Limited, FundingKnight, Indiegogo Inc., Landbay Partners Limited, Assetz Capital, Kiva Microfunds, Kickstarter PBC
Which transformative trends will shape the alternative finance market landscape?
Major companies operating in the alternative finance market are focused on developing innovative services, such as Short-Term Alternative Finance Fund to strengthen their position in the market. The Short-Term Alternative Finance Fund is an investment vehicle focused on private credit assets under one-year durations, offering institutional investors a low-volatility alternative to cash and short-dated credit options. For instance, in 2024, Legal & General Investment Management (LGIM) a UK-Based asset management and investment solutions company launched its Short-Term Alternative Finance Fund offering alternative finance as investors seek low-volatility, short-duration credit options. Positioned under LGIM’s new RAIF platform, this fund meets a growing demand for liquidity-focused private credit options, such as trade receivables and asset-backed financing, targeting investors such as pension funds and insurers. This move underscores a broader industry shift, as institutions increasingly favor private credit assets over traditional cash reserves, driven by higher yield potential and effective risk management.
How do regional factors impact the alternative finance market, and which region is the largest contributor?
North America was the largest region in the alternative finance market in 2024. The regions covered in the alternative finance market report are Asia-Pacific, Western Europe, Eastern Europe, North America, South America, Middle East, Africa.
What Does The Alternative Finance Market Report 2025 Offer?
The alternative finance market research report from The Business Research Company offers global market size, growth rate, regional shares, competitor analysis, detailed segments, trends, and opportunities.
Alternative finance refers to financial channels and instruments that have emerged outside the traditional financial system, encompassing a variety of innovative funding options available to individuals and businesses. This sector includes methods of raising capital that differ from conventional banking, stock markets, and investment vehicles. Alternative finance provides more accessible, flexible, and diverse funding options, particularly benefiting startups, small businesses, and individuals who face challenges obtaining finance through traditional means.
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