Entrenching Innovation - The 4th UK Alternative Finance Industry Report

Zhang, Bryan Zheng; Ziegler, Tania; Garvey, Kieran; Ridler, Samantha; Burton, Justin; Yerolemou, Nikos

doi:10.2139/ssrn.3084570

Cited by 47 publications

(54 citation statements)

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“…There is also a large and growing volume of P2P unsecured consumer lending, but this still accounts for only a small share of the total UK market for unsecured consumer loans. Source: Authors' configuration based on data on the end-year stock of financing from Zhang et al (2016a). Figure 1 shows a breakdown of this alternative finance.…”

Section: The United Kingdommentioning

confidence: 99%

The Business Models and Economics of Peer-to-Peer Lending

2016

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Citation: MILNE, A. and PARBOTEEAH, P., 2016. The business models and economics of peer-to-peer lending. ECRI Research Report No 17, May 2016. Additional Information:• This is a research report. AbstractThis paper reviews peer-to-peer (P2P) lending, its development in the UK and other countries, and assesses the business and economic policy issues surrounding this new form of intermediation. P2P platform technology allows direct matching of borrowers' and lenders' diversification over a large number of borrowers without the loans having to be held on an intermediary balance sheet. P2P lending has developed rapidly in both the US and the UK, but it still represents a small fraction, less than 1%, of the stock of bank lending. In the UK -but not elsewhere -it is an important source of loans for smaller companies. We argue that P2P lending is fundamentally complementary to, and not competitive with, conventional banking. We therefore expect banks to adapt to the emergence of P2P lending, either by cooperating closely with third-party P2P lending platforms or offering their own proprietary platforms. We also argue that the full development of the sector requires much further work addressing the risks and business and regulatory issues in P2P lending, including risk communication, orderly resolution of platform failure, control of liquidity risks and minimisation of fraud, security and operational risks. This will depend on developing reliable business processes, the promotion to the full extent possible of transparency and standardisation and appropriate regulation that serves the needs of customers.Key words: Marketplace lending, financial regulation, credit risk, credit markets, liquidity risk, standardisation, digital economy, banking competition, credit availability, small business lending, consumer credit JEL numbers: G21, G28, L21The European Credit Research Institute (ECRI) is a research institution based in Brussels. Established in 1999 for the study of banking and credit in Europe, ECRI focuses on institutional, economic and legal aspects related to retail finance and credit reporting. The institute provides expert analysis and academic research for a better understanding of the economic and social impact of credit. ECRI supports and funds independent academic research projects. The institute monitors markets and regulatory changes and looks at their impact nationally and internationally.Alistair Milne, Corresponding author. Professor,

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Section: The United Kingdommentioning

confidence: 99%

The Business Models and Economics of Peer-to-Peer Lending

2016

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“…It is the mainstream which attracts massive investments from various subjects of public [35], [36], or [9]. The availability of such an alternative finance instrument has an important role in stimulating economic development.…”

Section: Crowdfundingmentioning

confidence: 99%

“…Even though crowdfunding is still a new phenomenon and it struggles with poor supply of adequate data, there are several studies discussing factors and conditions for its development available, e.g. Bruton [5] or Zhang et al [35]. Each of these studies mentions the importance of several aspects playing a significant role in development such as regulatory framework, cooperation with other subjects (e.g.…”

Section: Crowdfundingmentioning

confidence: 99%

“…There is a very few systematic research to benchmark the alternative finance market, nor to educate policy makers, public. One of the best known researches, Sustaining momentum, the 2 nd European alternative finance industry report [35], associates alternative finance with online environment and describes a rapid growth across Europe during last several years.…”

Section: Introductionmentioning

confidence: 99%

“…Crowdfunding is a financial tool that enables to fund business, cultural or social activities. Moreover, it enables involvement of wide audience and it is understood as the most favorite alternative type of finance instrument; it holds the 1st place in ranking on the EU alternative finance market [35]. Understanding venture capital as an alternative source of financing varies.…”

Section: Introductionmentioning

confidence: 99%

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Comparative Analysis Study of Selected Alternative Finance

Procházková

Musil²

2017

ACC

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Alternative finance industry is considered as an industry with various financial channels that have a position outside of the traditional financial system. Currently, the alternative finance market is emerging the economy. This article presents an analysis of two alternative finance tools, crowdfunding and venture capital. The analysis is a part of a larger research project which is focused on the alternative finance market. As the topic itself is quite new, the paper focuses first on the identification of the theoretical background. A comprehensive theoretical review follows, a study investigating selected aspects and the position of these alternative finance tools on markets is provided. A comparative study was conducted using data mapping several important areas related to venture capital and crowdfunding investment. The results of the analysis provide an answer to the question what the position of the discussed alternative finance instruments within the Czech market is in comparison to selected EU countries and open questions for further research.

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Cost‐sensitive machine learning to support startup investment decisions

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Elovici,

Schwartz

2024

Intell Sys Acc Fin Mgmt

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SummaryIn 2022, global startup investments exceeded US$445 billion, sourced from entities like venture capital (VC) funds, angel investors, and equity crowdfunding. Despite their role in driving innovation, startup investments often fall short of S&P 500 returns. Surprisingly, the potential of artificial intelligence (AI) remains untapped by investors, despite AI's growing sway in financial decision‐making. Our empirical analysis predicts the success of 10,000 Israeli startups, utilizing diverse machine learning models. Unlike prior research, we employ the MetaCost algorithm to convert models into cost‐sensitive variants, minimizing total cost instead of total error. This innovative approach enables varied costs linked to different prediction errors. Our results underscore that these cost‐sensitive machine learning models significantly reduce risk for VC funds and startup investors compared to traditional ones. Furthermore, these models provide investors with a distinct capability to tailor their risk profiles, aligning predictions with their risk appetite. However, while cost‐sensitive machine learning reduces risk, it may limit potential gains by predicting fewer successful startups. To address this, we propose methods to enhance successful startup identification, including aggregating outcomes from multiple MetaCost models, particularly advantageous for smaller deal flows. Our research advances AI's role in startup investing, presenting a pivotal tool for investors navigating this domain.

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Entrenching Innovation - The 4th UK Alternative Finance Industry Report

Cited by 47 publications

References 1 publication

The Business Models and Economics of Peer-to-Peer Lending

The Business Models and Economics of Peer-to-Peer Lending

Comparative Analysis Study of Selected Alternative Finance

Cost‐sensitive machine learning to support startup investment decisions

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