Research by pan-European investment bank Liberum has revealed that market penetration by UK peer-to-peer lender platforms (and other forms of alternative finance) is 15 times greater than in Europe.

The study shows that Europe’s alternative finance industry is three times smaller than the UK’s, where lending volumes stand at around £3bn ($4.5bn). But a massive opportunity lurks within these statistics: Europe’s addressable market is 5.2 times bigger than the UK’s.

Commenting on the study, Liberum’s Director of Fintech, Cormac Leech, said:

“What’s interesting is that the penetration is extremely low. In fact, it’s just 1 per cent of the addressable market.”

Leech suggests that there is a huge amount of space for catch-up growth. The UK’s alternative finance/direct lending market is estimated to grow by approximately 85 per cent this year. But Liberum expects the European market to expand by 200 per cent. By 2020, the bank expects continental volumes to have overtaken the UK’s, despite starting from a lower base.

But Bryan Zhang, Director of the Cambridge Centre for Alternative Finance at Judge Business School, sounded a note of caution. The law on the continent, he said, often acts to impede innovation, with regulators making it mandatory for platforms to be partnered with banks – an arrangement which has led to a shortage of SME and individual loans from retail investors on platforms.

The bottom line for alternative finance in Europe, however, was not ultimately discouraging. Zhang explained that the situation is still very fluid, adding that what really mattered for the alternative finance industry on the continent was the quality of growth rather than the speed.