The introduction of the Innovative Finance Isa this year could have a “significant impact” on the use of alternative finance.
Research, carried by Nesta and the University of Cambridge, found the new Isa could add 26.43 per cent to the annual volume of peer-to-peer consumer lending platforms.
Meanwhile peer-to-peer business lenders expect to see a 27 per cent increase.
This is against a background of rapidly increasing use of alternative finance, such as equity-based crowdfunding, which has grown from £28m in 2013 to £245.03m in 2015 - excluding real estate.
The report stated that there are many indications that the online alternative finance market will continue to experience significant growth in the years to come. “In light of this, we were interested in understanding what platforms perceived as the biggest risks to the future growth of their market.
“The potential ‘collapse of one or more of the well-known platforms due to malpractice’ was seen as the highest risk to future growth, with 57 per cent of surveyed platforms considering this factor as a high or very high risk.”
The report said that in Europe there has been the first significant example of this, when a Swedish platform suspended its business due to suspicion of misconduct, including misuse of client money.
The report said that looking ahead, it will be interesting to see what impact that a collapsed platform might have on the future development of the industry, in terms of investor confidence, public sentiment and regulatory implications.
The Innovative Finance Isa will be launched on 6 April and the regulator has said it will not allow advisers to charge commission on peer-to-peer lending agreements.
Last week former FSA chairman Lord Turner slammed peer-to-peer lending, saying it would “make the worst bankers look like absolute lending geniuses”.
The research also found that the use of pension-led funding has been broadly flat over the last few years.
Pension-led funding raised £23m of investment into British business during 2015. In 2013 and in 2014 it raised £25m of investment.
The report also found that in 2015 almost a third of businesses were accepted into pension-led funding platforms with an average deal size of £82,131.
Despite this, the number of advisers turning to pension-led funding to help their SME clients has increased four-fold in the last three months, according to Clifton Asset Management.
Anthony Carty, group financial planning and business development director at the firm, said that the report only partially represents the growth of pension-led funding in the UK, as there are still many other providers in the market that have chosen not to share their data with Nesta.
“This is disappointing, as the more we spread the word of PLF’s effectiveness in business growth and development, the more we will see advisers recommending it as an option to their clients.”
He added that the modest drop in the use of pension-led financing could be due to pension reforms, because business owners initially assumed they could just draw what they wanted from their pension to put into their business.
damian.fantato@ft.com
