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    Hi all,
    I'd be really interested to hear your guys thoughts on alternative finance. Alternative finance is presenting a major challenge to both established banking models and a significant opportunity to diversify sources of finance. Almost a decade after Lehmans crashed back in 2008, European companies and consumers can still find established banks reluctant or unable to extent credit, leaving a gap for new and innovative channels of financing. The UK itself is at the forefront of the European alternative finance industry with London fast developing as a global hub to rival Silicon Valley in the US. Given this, has anyone here got any experience with peer-to-peer lending or other forms of alternative finance? If so, did you find them profitable/useful, and do you think this industry will boom or bust looking forward?

    Personally I think it is a huge innovation which is likely to transform the banking industry looking forward and will probably be especially useful for financing small loans.

    Cheers,
    Alex
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    We've got a few questions at Almanis if you guys are interested in learning about or predicting the future of AltFi as well, for example: https://app.almanis.com/#/outcomes/305 so let us know your thoughts!
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    Honest question: what is alternative finance?
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    (Original post by estel)
    Honest question: what is alternative finance?
    Sorry I probably should've made that clear! Alternative finance really covers any form of finance outside the 3 traditional types of assets (cash, stocks and bonds) - i.e. any form of finance outside the traditional scope of banks and capital markets. This includes but is not limited to peer-to-peer lending and crowdfunded equity - where new institutions are using technology to collate funds. Does this make sense?
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    (Original post by Alex from almanis)
    ...and do you think this industry will boom or bust looking forward?

    Personally I think it is a huge innovation which is likely to transform the banking industry looking forward and will probably be especially useful for financing small loans.

    Cheers,
    Alex
    I've been following AltFin as part of my general interest in FinTech and so far I still think it's too soon to call but I remain rather sceptical. The growth in this space has been huge meaning there isn't much long term data that could support an opinion definitively.

    I do think that for a private individual with excess savings, it isn't really an alternative to a savings account when there is still no FSCS coverage for these schemes. Given the increasing trend towards securitisation (which removes the incentive to quality-check the loans a la 2007 US sub-prime mortgage crisis), this seems rather important. Indeed, I think the true litmus test for the industry will be it's resilience to a financial crisis it has yet to experience.

    I also question how "peer to peer" many of these firms actually are. Much of the financing for AltFin doesn't seem to come from private individuals, but the banks themselves (JP Morgan bought almost $1 billion of Lending Club loans last month). I do not see an alternative lending channel for the existing banking industry as a transformation of it.

    Having said that, I do acknowledge there is a probably a level of under-serving for certain segments where AltFin is useful, I just question how ground-breaking it will actually be in disrupting the traditional banking business model. I can't see it replacing the existing system in the vast majority of cases.

    Edit: This Forbes article pretty much sums up my thinking: http://www.forbes.com/sites/valleyvo.../#17adf60b4874
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    (Original post by The Financier)
    I've been following AltFin as part of my general interest in FinTech and so far I still think it's too soon to call but I remain rather sceptical. The growth in this space has been huge meaning there isn't much long term data that could support an opinion definitively.

    I do think that for a private individual with excess savings, it isn't really an alternative to a savings account when there is still no FSCS coverage for these schemes. Given the increasing trend towards securitisation (which removes the incentive to quality-check the loans a la 2007 US sub-prime mortgage crisis), this seems rather important. Indeed, I think the true litmus test for the industry will be it's resilience to a financial crisis it has yet to experience.

    I also question how "peer to peer" many of these firms actually are. Much of the financing for AltFin doesn't seem to come from private individuals, but the banks themselves (JP Morgan bought almost $1 billion of Lending Club loans last month). I do not see an alternative lending channel for the existing banking industry as a transformation of it.

    Having said that, I do acknowledge there is a probably a level of under-serving for certain segments where AltFin is useful, I just question how ground-breaking it will actually be in disrupting the traditional banking business model. I can't see it replacing the existing system in the vast majority of cases.

    Edit: This Forbes article pretty much sums up my thinking: http://www.forbes.com/sites/valleyvo.../#17adf60b4874
    Hmmm I'd be interested to see if this is changing over time and whether the percentage of the so called 'peer-to-peer' financing that is done by banks is increasing or decreasing
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    (Original post by Alex from almanis)
    Hmmm I'd be interested to see if this is changing over time and whether the percentage of the so called 'peer-to-peer' financing that is done by banks is increasing or decreasing
    Resurrecting the thread slightly but if these firms are fiddling with the application dates on loans and selling loans to an investor when they were aware that they did not conform with the investor's requirements as Lending Club have done, that percentage is going to drop very quickly but not from an increase in non-bank demand. When the US' biggest platform is doing some really shady stuff like this, it does not reflect well on the entire sector.

    FT Alphaville made an interesting point yesterday that the banks are also catching up by developing their own online lending products. Wells Fargo are launching FastFlex that offers funding as soon as the next business day. Goldman Sachs are launching a product that very closely targets Proper Marketplace's customers which is backed by $17 billion in capital acquired from GE Capital. These guys aren't sitting on their hands in this space and the existing flagship P2P platforms haven't really found a diversified group of buyers of their loans (some are buying their own loans which defeats the point that these platforms are not meant to be at risk from the loans they offer and will probably bring the regulators they've avoided thus far onto their case) and are relying on the very people they are trying to take market-share from. It's a recipe for disaster.

    To quote the FT, "It’s the old story of picking the good innovations, and leaving the bad.

    Which is to say, if the lasting impact of peer-to-peer/marketplace/online lending is just better processes and systems for lending, that would still be a significant achievement. It would also be fintech — financial technology — in the proper sense of the word."
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    (Original post by Alex from almanis)
    Hi all,
    I'd be really interested to hear your guys thoughts on alternative finance. Alternative finance is presenting a major challenge to both established banking models and a significant opportunity to diversify sources of finance. Almost a decade after Lehmans crashed back in 2008, European companies and consumers can still find established banks reluctant or unable to extent credit, leaving a gap for new and innovative channels of financing. The UK itself is at the forefront of the European alternative finance industry with London fast developing as a global hub to rival Silicon Valley in the US. Given this, has anyone here got any experience with peer-to-peer lending or other forms of alternative finance? If so, did you find them profitable/useful, and do you think this industry will boom or bust looking forward?

    Personally I think it is a huge innovation which is likely to transform the banking industry looking forward and will probably be especially useful for financing small loans.

    Cheers,
    Alex
    as i plan on growing my company soon i have looked at issuing fixed percentage bonds at arround 20% return so i will get £250k and pay back £300k for ultra high end stock (tiffany, cartier, oscar hayman, rolex and some massive diamonds) and pay it back in full with the profits made (£660k post-tax) so i will have another £360,000 for reinvestment
 
 
 
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