Opportunities beyond traditional financing mechanisms: Alternative Financing
The last decade has seen the financial-services industry undergo significant structural transformation. Underpinning this change has been the rapid emergence of innovative technology which, in many cases, paved the way for further developments in the alternative finance market. As businesses are increasingly looking beyond traditional sources of external finance, the alternative finance market has significantly changed the landscape of sources of finance for them. In addition, the marriage of finance and technology has markedly disrupted traditional models of financial intermediation, transferring risk, effecting payments and making markets. Start-ups are now competing with traditional financial services and are radically changing the expectations and customer engagement processes by offering customer-centric services capable of combining speed and flexibility.
That being said, alternative finance as a concept still remains somewhat amorphous. As a result of its opacity, limited regulations, and insufficient liquidity, policy makers worldwide have sought to restrict participation in the alternative finance space to accredited and institutional investors. Access to new technology over the years however has somewhat democratised alternative finance to less sophisticated retail investors through innovative and decentralised business models. With developing economies already showing a huge appetite for alternative finance, the growth of the industry growth looks set to continue unabated for the foreseeable future.
The central question is what role should the alternative financial system play and how should it be governed to ensure each participant’s interests are best accounted for? Under this series, ICMR attempts to determine what are the implications of these paradigmatic shifts to societal financial systems. This sets the stage for what measures, tools, and theories need to be understood prior to establishing any new framework for a cashless age, as well as to determine what are the obstacles and limitations of the current regulatory and policy frameworks.