Alternative Finance Market Report 2025

The alternative finance market size has grown exponentially in recent years. It will grow from $260.65 billion in 2024 to $314.55 billion in 2025 at a compound annual growth rate (CAGR) of 20.7%. The growth in the historic period can be attributed to the rise of online platforms and social media, increasing adoption of peer-to-peer lending, increasing use of cryptocurrency and blockchain, rise in sustainability and green finance, and rise of embedded finance.

The alternative finance market size is expected to see exponential growth in the next few years. It will grow to $659.94 billion in 2029 at a compound annual growth rate (CAGR) of 20.4%. The growth in the forecast period can be attributed to the rising number of technology-driven lenders, growing adoption of decentralized finance, increasing application of artificial intelligence, growing popularity of initial coin offerings, and growing microfinance activities. Major trends in the forecast period include technological advancements, utilization of AI and data analytics, rise in adoption of internet-of-things, and blockchain-based alternative lending platforms.

The forecast of 20.4% growth over the next five years reflects a modest reduction of 0.6% from the previous estimate for this market. This reduction is primarily due to the impact of tariffs between the US and other countries. This is likely to directly affect the US through supply chain disruptions for peer-to-peer lending platform infrastructure and blockchain-based transaction verification systems, sourced from key regions such as Germany and Singapore, which could lead to reduced access to non-traditional funding options and increased costs for digital financial services. The effect will also be felt more widely due to reciprocal tariffs and the negative effect on the global economy and trade due to increased trade tensions and restrictions.

The growing number of small and medium-sized businesses (SMBs) is expected to drive the expansion of the alternative finance market. SMBs are defined by specific criteria such as the number of employees, annual revenue, or assets. The rise in the number of SMBs can be attributed to various factors, including crowdfunding, peer-to-peer lending, tax incentives, and business development programs. Alternative finance offers SMBs diverse and accessible funding options that address some of the limitations and challenges of traditional financing methods. For example, in October 2023, the Department for Business and Trade, a UK-based government agency, reported that the number of SMBs increased from 5.5 million in 2022 to 5.54 million in 2023. As a result, the growing number of SMBs is fueling the growth of the alternative finance market.

Major companies in the alternative finance market are focusing on developing innovative services, such as the Short-Term Alternative Finance Fund, to strengthen their market position. The Short-Term Alternative Finance Fund is an investment vehicle that targets private credit assets with durations under one year, providing institutional investors with a low-volatility alternative to cash and short-term credit options. For example, in 2024, Legal & General Investment Management (LGIM), a UK-based asset management and investment solutions company, launched its Short-Term Alternative Finance Fund. This fund caters to investors seeking low-volatility, short-duration credit options and is positioned under LGIM's new RAIF platform. It addresses the growing demand for liquidity-focused private credit assets, including trade receivables and asset-backed financing, targeting investors like pension funds and insurers. This move reflects a broader industry trend where institutions are increasingly turning to private credit assets rather than traditional cash reserves, driven by higher yield potential and more effective risk management.

In March 2024, Levenue B.V., a Netherlands-based financial services company, acquired MidFunder AG to strengthen its market presence in Switzerland. This strategic move leverages MidFunder's established customer base and technological capabilities in the alternative financing sector.

Major companies operating in the alternative finance market are PayPal Holdings Inc., Rocket Mortgage, Bread Financial Holdings, Coinbase Global Inc., Social Finance Inc., Affirm Inc., LendingClub Corporation, OnDeck Capital Inc., Fiverr International Ltd., Betterment Holdings Inc., Funding Circle Holdings plc, Prosper Marketplace Inc., RateSetter, Wealthfront Corporation, OurCrowd Ltd., Freelancer Technology Pty Limited, FundingKnight, Indiegogo Inc., Landbay Partners Limited, Assetz Capital, Kiva Microfunds, Kickstarter PBC.

North America was the largest region in the alternative finance market in 2024. The regions covered in the alternative finance market report are Asia-Pacific, Western Europe, Eastern Europe, North America, South America, Middle East, Africa. The countries covered in the alternative finance market report are Australia, Brazil, China, France, Germany, India, Indonesia, Japan, Russia, South Korea, UK, USA, Canada, Italy, Spain.

The alternative finance market includes revenues earned by entities by providing services such as equity crowdfunding, debt crowdfunding, revenue-based financing, and online microfinance. The market value includes the value of related goods sold by the service provider or included within the service offering. Only goods and services traded between entities or sold to end consumers are included.

The market value is defined as the revenues that enterprises gain from the sale of goods and/or services within the specified market and geography through sales, grants, or donations in terms of the currency (in USD, unless otherwise specified).

Note that the outlook for this market is being affected by rapid changes in trade relations and tariffs globally. The report will be updated prior to delivery to reflect the latest status, including revised forecasts and quantified impact analysis. The report’s Recommendations and Conclusions sections will be updated to give strategies for entities dealing with the fast-moving international environment.

The sharp rise in U.S. tariffs and the ensuing trade tensions in spring 2025 are having a considerable impact on the financial sector, particularly in the areas of investment strategies and risk management. The increased tariffs have intensified market volatility, leading institutional investors to adopt more cautious approaches and driving greater demand for hedging solutions. Banks and asset managers are encountering higher costs in cross-border transactions as disrupted global supply chains and declining corporate earnings weigh on equity market performance. At the same time, insurance providers are facing elevated claims risks linked to supply chain interruptions and trade-related business losses. Furthermore, reduced consumer spending and weaker export demand are limiting credit growth and dampening investment appetite. In response to these challenges, the sector must focus on diversification, accelerate digital transformation, and strengthen scenario planning to manage the heightened economic uncertainty and safeguard profitability.

Alternative finance refers to a range of financial channels and instruments that have emerged outside the conventional financial system. It encompasses various innovative funding options available to both individuals and businesses, offering alternatives to traditional banking, stock markets, and conventional investment avenues. This sector provides more accessible, flexible, and diverse funding choices, particularly advantageous for startups, small businesses, and individuals who may encounter obstacles in obtaining finance through traditional routes.

Key types of alternative finance include peer-to-peer lending, crowdfunding, invoice trading, and other methods. Peer-to-peer lending allows individuals or businesses to borrow money directly from other individuals or investors, bypassing traditional financial institutions. These platforms operate through various business models, including traditional lending and alternative marketplace lending, catering to a wide range of users, from enterprises to individual borrowers.

The alternative finance market research report is one of a series of new reports that provides alternative finance market statistics, including alternative finance industry global market size, regional shares, competitors with an alternative finance market share, detailed alternative finance market segments, market trends, and opportunities, and any further data you may need to thrive in the alternative finance industry. This alternative finance research report delivers a complete perspective of everything you need, with an in-depth analysis of the current and future scenarios of the industry.

The revenues for a specified geography are consumption values that are revenues generated by organizations in the specified geography within the market, irrespective of where they are produced. It does not include revenues from resales along the supply chain, either further along the supply chain or as part of other products.

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