European providers of alternative finance, Debitum and Mintos, slip into UK financing void caused by Brexit
With the United Kingdom poised to leave the European Union on 29 March 2019, its finance industry is surrounded by uncertainty. European financial experts are unsure whether the UK’s financial sector will benefit from Brexit, or undergo a ‘Brexodus’ as banks look to move to the continent.
The June 2016 Brexit referendum has caused a level of uncertainty around traditional investments – with uncertainty comes limited lending and borrowing. Limited lending and borrowing leads to deferred investments. Ultimately, this limits economic growth.
As more questions than answers about the future of the UK’s long-standing financial sector remain, financial experts believe that Brexit will allow alternative finance providers and investors to expand their portfolios.
The popularity of alternative finance rocketed in the UK after the global financial crisis of 2008 as investors sought out stable asset classes providing a quick return-on-investment – between 2010-2018, the alternative finance-market raised £11bn in the UK. It also grew from £3.2 to 4.6bn (43%) during 2015-2016.
Financial experts believe that the nature of alternative finance is one of the reasons it will appeal to UK investors who are seeking a stable and versatile investment as they move away from the UK’s traditional finance industry due to the slim possibility of leading international banks departing London for the continent.
In addition to the political uncertainty that Brexit brings, the economic uncertainty of the June 2016 referendum is also driving investors away from banks and towards alternative finance providers. This is down to the volatility it has caused throughout traditional markets. In contrast to traditional financing methods, alternative finance provides investors with low-risk, short-term yields with alternative finance providers offering payback times times of 2 to 6 months, whilst bank loans often have a maturity period of 1 to 5 years.
The regulatory issues that Brexit may introduce to banks and other traditional finance providers are also set to benefit the alternative finance sector. Depending on the outcome of the Brexit negotiations, regulations on banks and other such financial institutions may tighten. However, alternative finance providers are unregulated – or at least lesser regulated – meaning they will be able to spend less time on adjusting their businesses to newly introduced regulations, and focusing on lending.
A number of alternative investment companies such as Debitum Network and Mintos operate from mainland Europe, and could provide British investors with stable, unregulated investment opportunities across a number of international markets.
Alternative lenders are hopeful of increased business opportunities beyond Europe as a result of Brexit such as potential trade deals with Asia, Canada, and those already signed with six southern African states.
Both Debitum Network and Mintos are P2P lending platforms, which are aimed at connecting global investors and borrowers. Whilst Mintos issues both personal and business loans, Debitum Network works principally for small businesses seeking small loans with the loans they need to finance business essentials such as startup costs and short-term cash injections. Unlike Mintos, Debitum Network accepts both fiat and crypto-currency as a form of investment and withdrawal, and is based on blockchain technology for added security.
“It is brilliant to see that UK investors are looking at alternative finance,” said Debitum Network co-founder, Martin Liberts. “As questions remain surrounding traditional financing methods, hopefully investors will look to alternative finance thanks to its stable, low-risk nature and its quick-return on investments.”
With a no-deal Brexit seeming ever likely and another general election a possibility, alternative finance is one entity seemingly to benefit from the UK’s departure from the EU.