News

Traditional finance is becoming the alternative

February 09, 2017 • By TAB team

2017 marks the death of the term 'alternative finance'. With the changing tides of financial affairs and technology, the term has become an obsolete relic of a past era, when we were still constrained by long-established fiscal models.

2017 marks the death of the term 'alternative finance'. With the changing tides of financial affairs and technology, the term has become an obsolete relic of a past era, when we were still constrained by long-established fiscal models.

Methods of finance and funding that were considered ‘alternative’ only a few years ago are now firmly established and growing fast. The largest platforms behind this movement are heading towards IPO territory (or already there) - Lending Club, Prosper, Funding Circle, and Zopa to name but a few.

So where’s the current boundary between traditional and alternative? And for how much longer is the term 'alternative' going to be relevant?

Not-so alternative capital

When we hear 'alternative finance', we typically think of crowd funding (debt, equity, rewards-based) and peer-to-peer marketplace lending, as well as non-marketplace forms of financing, plus the advent of new technologies, such as crypto-currencies and social impact bonds. But this definition is beginning to look obsolete as these technological advancements make huge headway globally.

In 2017, the diversity of 'alternative finance' products and services on offer is vast. New manifestations are appearing all the time, aiming to satisfy the burgeoning demand for a form of digital finance that goes beyond banks and capital markets.

The big boys are getting in on the act

However, the most telling development of all is that traditional finance is choosing to make 'alternative' finance a part of its business. In 2016, Goldman Sachs and Hargreaves Lansdown unveiled lending platforms. In 2017, Deloitte invested yet more money into Blockchain, BNP Paribas announced it intends to invest billions in digital transformation, and software vendors Misys launched a software package to enable banks to enter the P2P lending space.

Evidently, the behemoths are embracing the alternatives, which only means one thing: that alternative is not alternative anymore. With government making preparations for new technologies, and increased regulation swinging behind the ‘alternative’ market, investors are also being given the confidence they need to keep growth firing.

2017 looks set to be a key year in the fiscal evolution. Soon, ‘alternative finance’ will simply be ‘finance’, and the more traditional fiscal formats might soon start to look ...well....alternative!