Taken aback by the news that the alternative finance sector in the UK is worth an estimated £3.2 billion? If you are, steel yourself, because it’s going to get bigger.

According to a new study from Amicus Finance, the value of the alternative finance market almost doubled in 2015, from £1.74 billion in 2014, with demand soaring for services such as invoice finance, peer-to-peer lending and crowdfunding. It comes as no surprise that the sector has grown rapidly but the rate of recent growth laid out in this new research is a big eye opener for the SME finance industry, not least traditional lenders that witnessing an increasingly fierce attack on their market share.

Indeed, the launch by HSBC of a multi-million-pound SME fund can be seen as a direct reaction to rising competition from the alternative finance sector. Data from the Amicus research shows that over half of all small businesses have either used or considered alternative finance, a figure that, combined with the value of the sector, underlines the growing threat posed to what was once a big-bank dominated area by services that can be easily accessed and quickly actioned.

Furthermore, the move by HSBC comes at the same time as the launch of the Smart Business service for SMEs by Barclays. As part of this service, small businesses can receive information and advice on managing cashflow. The unveiling of this service comes just weeks after the government announced reform of legislation governing the sharing of credit data that will broaden the market reach of the alternative finance sector.

While traditional lenders still hold a controlling share of the SME finance market, the launch of new SME funds and services – HSBC follow the likes of Santander and RBSC in doing so – doesn’t safeguard them further market share loss. They will have to work much harder to regain the trust of small business owners and, more to the point, the alternative finance looks set to keep growing, with favourable government reform and economic headwinds (uncertainty regarding the EU, pension auto enrolment, etc.) only creating more demand among SMEs that are increasingly using services that are more flexible, affordable and convenient.

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