This article was first published in the July/August 2016 China edition of Accounting and Business magazine.

Online alternative finance is thriving in the Asia-Pacific region. The market totalled an estimated US$102.81bn in 2015, recording year-on-year growth of 323%.

In mainland China, the world’s leading online alternative finance market by transaction volume, the three largest alternative finance models in 2015 were all based on marketplace/peer-to-peer lending: consumer lending (achieving market volumes of US$52.44bn), business lending (US$39.63bn) and real estate lending (US$5.51bn) respectively (see box). In total, marketplace/peer-to-peer lending platforms in China have facilitated US$129.53bn worth of loans over the past three years.

New research also now shows the spread of online alternative finance across the rest of the Asia-Pacific region. Japan leads the way outside China, with an online alternative finance market generating a transaction volume of US$360.23m in 2015, followed by Australia (US$348.37), New Zealand (US$267.77m), South Korea (US$41.18m) and India (US$39.91m). Marketplace/peer-to-peer lending also dominates the alternative finance scene in the Asia-Pacific region outside China; marketplace/peer-to-peer consumer and business lending together accounted for around 60% of the total market volume over the past three years. Marketplace/peer-to-peer consumer lending is growing fastest, with an average year-on-year growth rate of 653% between 2013 and 2015.

‘Unprecedented level of funding’

Many other forms of alternative finance are also growing in popularity, including invoice trading, various forms of crowdfunding (equity-based, reward-based, donation-based revenue/profit-sharing and real estate) and balance sheet consumer lending. Their prevalence is revealed in a recent report, Harnessing Potential: The Asia-Pacific Alternative Finance Benchmarking Report – the first comprehensive study of the Asia-Pacific online alternative finance market. The study was conducted by an international research team from the Cambridge Centre for Alternative Finance at Cambridge Judge Business School in the UK, the Tsinghua University Graduate School in Shenzhen, China, and The University of Sydney Business School in Australia, in partnership with KPMG and with the support of ACCA and CME Group Foundation. It is based on survey data from 503 leading alternative finance platforms operating in 17 Asia-Pacific countries and regions, of which 376 were from mainland China.

‘Alternative finance is one of the fastest-growing sectors of the global financial services industry, with 2015 witnessing an unprecedented level of funding,’ says Ian Pollari, partner, global fintech co-lead, KPMG. ‘2016 is predicted to be the year where alternative financial options finally join the ranks of the mainstream. We foresee continued growth in awareness among Asian consumers and businesses of the viable funding options alternative finance platforms can provide. We also anticipate greater levels of collaboration between incumbent financial organisations and alternative finance platforms, following the trend observed in the US and UK markets. With five of the world’s top 10 countries based on smartphone ownership coming from the region and observing higher rates of female participation in alternative finance markets, Asia has the potential to create world-leading online lending and funding platforms.’

As the report shows, in China, around 40% of lenders on marketplace/peer-to-peer consumer and business lending platforms are women. Women also make up around 19% of the borrowers on marketplace/peer-to-peer business lending platforms and over 10% of the fundraisers on equity-based crowdfunding platforms. Outside China, 33% of the borrowers on marketplace/peer-to-peer consumer lending platforms are women, as are 23% and 13% of fundraisers/entrepreneurs in rewards and equity-based crowdfunding respectively.    

‘For the first time, our report has provided empirical evidence demonstrating the diversity of the alternative finance markets in the Asia-Pacific region and the dominance of China within the sector globally, with over US$100bn in market volume in 2015,’ says Bryan Zhang¸ director of the Cambridge Centre for Alternative Finance and a research fellow at the Cambridge Judge Business School. ‘This is remarkable when compared to the US$36bn facilitated in the United States during the same period. Key markets across the rest of the APAC region are also rapidly emerging, especially in New Zealand and South Korea where the national regulations are deemed to be more supportive for the development of alternative finance. 2016 is likely to be a pivotal year for the industry in the region, as new regulatory frameworks are being implemented and various markets are likely to experience continued growth as well as consolidation.’

Diverse regulatory environment

As the online alternative finance market grows, increasing attention is being placed on how it should be regulated. The regulatory environment for alternative finance across Asia Pacific is diverse and rapidly changing. Some countries, such as Singapore and Thailand, have opted to regulate the new finance models within pre-existing regulatory frameworks. Others, such as Malaysia, New Zealand and South Korea, have created bespoke regulation to govern equity and debt-based alternative finance activities. In general, according to the recent research, alternative finance platforms in New Zealand and Malaysia see the existing and proposed regulation in their countries as adequate and appropriate, but platforms operating in Japan and South Korea are more concerned that the regulation they face is too strict and excessive. In China, the majority of platforms for all alternative finance models (with the exception of equity-based crowdfunding) deem existing regulation to be either inadequate and too relaxed, or recognise the need for specific regulation to be implemented.

Rosana Mirkovic, head of SME Policy at ACCA, believes that it is important for accountants to keep up with developments in alternative online finance. ‘Technology-driven alternative finance providers such as crowdfunding platforms are enabling entrepreneurs to do business in new and innovative ways, where conventional practice and behaviours do not necessarily apply,’ she says. ‘If accountants want to remain businesses’ most trusted advisers, they will need to keep up with these developments. Such changes are also likely to provide opportunities for developing new value-added services to businesses.’ Keeping track of developments in the Asia-Pacific region is therefore important, she believes. ‘These days, it is arguably no longer the US and UK that are leading the race for innovation in financial services, so we need reliable data on the development of the sector in Asia Pacific.’

Sarah Perrin, journalist

Swipe to view table

The great alternative finance model takeover

Alternative finance model Definition

2015 market volumes (US$), China

2015 market volumes (US$), rest of Asia Pacific

Marketplace/peer-to-peer consumer lending

Individuals or institutional funders provide a loan to a consumer borrower

52.44bn 326.22m

Marketplace/peer-to-peer business lending 

Individuals or institutional funders provide a loan to a business borrower

39.63bn 355.51m

Marketplace/peer-to-peer real-estate lending

Individuals or institutional funders provide a loan secured against a property to a consumer or business borrower

5.51bn 14.99m

Invoice trading

Individuals or institutional funders purchase invoices or receivable notes from a business (at a discount)

1.46bn 116.95m
Equity-based crowdfunding

Individuals or institutional funders purchase equity issued by a company

948.26m 64.13m

Reward-based crowdfunding

Backers provide finance to individuals, projects or companies in exchange for non-monetary rewards or products

  829.52m 81.22m
Balance sheet business lending The platform entity provides a loan directly to a business borrower 565.32m 120.62m

Donation-based crowdfunding

Donors provide funding to individuals, projects or companies based on philanthropic or civic motivations with no expectation of monetary or material return

141.69m 24.62m

Balance sheet consumer lending

The platform entity provides a loan directly to a business borrower 117.9m

Revenue/profit-sharing crowdfunding

Individuals or institutional funders provide a loan to a business, where repayment is determined by a percentage of future revenues or profits


Equity-based real estate crowdfunding

Individuals or institutional funders provide equity or subordinated debt financing for real estate


Source: Harnessing Potential: The Asia-Pacific Alternative Finance Benchmarking Report