What do credit unions and building societies have in common with today’s shiny alternative finance innovations such as crowdfunding and peer-to-peer (P2P) lending?
They are all examples of alternative finance, or financial channels or methods of fundraising that exist outside of traditional financial systems, such as banks or stock markets.
It’s easy to think that the idea of alternative finance is new, but it has roots as far back as ancient Rome, where the Collegia – mutual benefit societies – provided members with financial assistance, including loans and insurance.
In the UK in the 18th and 19th centuries, building societies emerged to help people pool resources and build homes, and in the 19th century, credit unions were formed as a way for people to save and borrow money within their communities.
Thanks to technological advancements and changing attitudes towards traditional finance, we’re seeing a big rise in the popularity of alternative finance in recent years.
Now, it is an umbrella term that spans various financing models, ranging from P2P lending, crowdfunding, microfinance, and other types of non-bank lending like cryptocurrencies, community finance, and social impact investing.
Useful benefits
Because alternative finance bypasses traditional banking models, it offers several useful benefits, which include increased access to capital for individuals and businesses that may not be available through traditional banking channels. That is particularly useful for those who may not have a credit history, or collateral required to secure a loan from a traditional bank.
Alternative finance platforms often operate with lower overhead costs, which can result in lower fees and interest rates for borrowers. Plus, a range of investment opportunities beyond stocks and bonds may be on offer, helping investors to spread their risk across different asset classes and potentially earn higher returns.
Flexibility is another upside. Alternative finance platforms can be more open than traditional banking institutions in terms of loan terms, repayment schedules, and other aspects of financing.
The ability to impact social issues through crowdfunding offers a real point of difference too. Supporting social causes and allowing for impact investing gives individuals the chance to invest in projects that matter to them.
Fast growing
The alternative lending market is one of the fastest growing sectors within UK finance and was worth £6.26 billion in 2021. And, according to Tracxn, there are 878 alternative lending start-ups in the UK. Here are three exciting start-up and early-stage companies operating in the space –discover many more on the Growth Business jobs board.
#1 – Plutus
A debit card is the offer at Plutus, which is a financial services platform for everyday users with banking needs. Customers get up to 8 per cent crypto rewards when spending with their Plutus debit card, and can swap it for card balance too.
The company is hiring a compliance co-lead to support the development of the compliance programme and use your experience to help maintain an excellent compliance-aware culture. To apply, you’ll need a minimum of five years’ relevant experience working in an e-money, payment services or a corporate banking environment.
#2 – Zilch
Buy now, pay later company Zilch was founded in 2018 with a mission to bin the old way of offering traditional credit. Instead, it created a way to pay that was fair, transparent and easy. Essentially, Zilch allows you to shop anywhere online, and pay off purchases over six weeks, in four installments.
It is seeking a process improvement specialist in London, who will join the business operations team and work collaboratively with multiple stakeholders to continually simplify, streamline and improve processes and services.
#3 – Lendable
An online platform for personal loans, Lendable is a P2P marketplace that enables users to borrow and lend personal loans with multiple amounts, terms, repayment options and returns on investments. One of the UK’s newest unicorns with a team of more than 250 people, it is among the top 10 fastest-growing tech companies in the UK and has been profitable since 2017.
Lendable is hiring: A senior credit analyst role is up for grabs in London. You’ll be great with numbers and love problem-solving. Plus, you’ll have experience using Python or SQL on a daily basis to generate insights from data and can use that insight to drive meaningful change.
Want a new job this year? Visit the Growth Business jobs board for thousands of opportunities.
Kirstie McDermott works for our job board partner, Jobbio. Based in Dublin, she has been a writer and editor across print and digital platforms for over 15 years.
