A decade ago, “alternative lending” in Britain was synonymous with a handful of peer-to-peer platforms promising to democratise finance. Today it has matured into a £10 billion ecosystem spanning marketplace loans, invoice finance, crowdfunding, and buy-now-pay-later (BNPL) credit — a parallel banking system powered by data, APIs and investor capital.

Between 2015 and 2020, volumes tracked by the Cambridge Centre for Alternative Finance more than doubled from US $ 4.9 billion to US $ 12.6 billion. Debt-based models — chiefly peer-to-peer and marketplace lending — accounted for most of that growth, while pandemic-era surges in digital payments drove non-investment products such as BNPL.

Figure 1.

From Peer-to-Peer to Institutional Capital

The first wave of P2P lending emerged in the aftermath of the 2008 financial crisis, when banks curtailed SME credit and retail investors chased yield. By 2017, business-lending platforms were originating around £2 billion of loans — nearly one in ten new SME loans nationwide.

Figure 2.

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Figure 3.

COVID, Credit Schemes and the Rise of Fintech Funding

Government-backed lending schemes such as the Coronavirus Business Interruption Loan Scheme (CBILS) temporarily reduced the market’s share of SME credit. Yet fintechs accredited to deliver those programmes gained credibility — embedding themselves in the financial mainstream.

By 2024, British Business Bank data show gross SME lending by high-street banks up 13 % to £16 billion, but net lending still negative as repayments outpaced new borrowing. Roughly 60 % of new SME credit originated outside the main banks.

BNPL and the Consumer Credit Frontier

Perhaps the most conspicuous growth story has been buy-now-pay-later.

Figure 4.

Technology and Data: The New Infrastructure of Credit

Open Banking — launched in 2018 — has transformed underwriting.

Figure 5.

Institutionalisation and Regulation

Alternative lending has become a fixture of institutional portfolios. British Business Investments has funded marketplace lenders, while PIMCO and KKR securitise loan books.

The FCA has tightened rules following failures such as Lendy, requiring stress-testing and clearer disclosure.

The Outlook: Integration, Not Insurrection

Forecasts by Research and Markets suggest the sector will expand 14 % annually through 2024 and grow 9 % per year to 2028.

Figure 6.

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Conclusion

From £3 billion in 2015 to around £10 billion by 2020, Britain’s alternative-lending market has matured into a permanent pillar of finance. It channels institutional money into productive credit, harnesses technology to expand access, and operates under increasingly robust regulation.

If the 2010s were about proving the concept, the 2020s are about scale and credibility. Alternative lending in Britain is no longer “alternative” — it is the new architecture of credit.

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