PASLA: Retail lending on a global scale
28 February 2025 China
Image: SFT
A discussion on retail lending in Macau for the Pan Asia Securities Lending Association (PASLA) left one panellist asking: “Why should institutional asset owners have an exclusive right to this income stream that should be democratised across everyone that owns an asset?”
The participation of retail investors in the financial markets is highly regulated according to Stuart Jarvis, head of strategic partnerships at Sharegain, who explained that extending SBL to retail can prove challenging due to the need to ensure that regulatory compliance is aligned with standard securities lending transaction practices.
“I love the expression of Wall Street to Main Street. That's exactly what it is — we're bringing practices that have been around for a long time and have benefitted institutions, to retail, to Main Street,” Jarvis highlighted.
The ‘Retail and Private Wealth: Unlocking value through Securities Finance’ panel was moderated by Darren Measures, head of securities finance at Maybank Securities. It discussed the retail lending landscape in the US, Europe, and APAC.
In Europe, retail ownership has grown massively as it has globally, according to Jarvis. For example, Germany has seen a 50 per cent growth in the number of retail brokerage accounts over the last three years.
He explored: “If we look at Europe holistically, we’re probably doing it a disservice because the knowledge level, the participation level, is actually very nuanced. If you look to the Nordic markets, Sweden for example, 35 per cent of households are designated retail investors, they have retail investing accounts. Whereas in the UK, for example, that figure is under six per cent.”
Reviewing this, Jarvis suggested that it reflects both the financial literacy and knowledge levels within respective countries and feeds the willingness to adopt new products. He continued: “It's no surprise that the Nordic region was the vanguard of bringing the retail lending product to Europe, but we are starting to see that spread across the 27 markets.”
While the UK has introduced a framework for retail lending, there remain challenges. Jarvis noted that, currently in Europe, retail lending is only active in 12 jurisdictions. Europe has “taken a lot of steps to follow the US”, but there are still significant steps ahead.
Moving forward in the discussion, Measures asked panellists why now was the time for retail and private wealth lending. The most important aspect seemed to be the shift in demographic in retail participation in financial markets.
Gen Z are investing a lot earlier than previous generations and follow different sources for investment advice compared to previous generations, with the use of social media affecting their asset ownership.
“The Gen Z generation is due to inherit US$83 trillion worth of wealth over the next 20 years, with 18 trillion of that coming in the next five years. So the importance of that segment, satisfying it, and bringing product to that segment is massive,” Jarvis confirmed.
The panel also heard that the broadening of asset demand has played a significant role in the growth of retail lending. For instance, Jarvis noted quantitative strategies within the hedge fund world as a key driver on the demand side. He also sees a “massive growth” in the demand for access.
Institutional asset owners and investors are constrained by many aspects that retail is not, such as investment committees, tracking targets, and liquidity constraints. The impact of that, according to Jarvis, is that the breadth of assets owned by these institutional investors is often far narrower than that owned by retail investors.
“Prime brokerage mandates from hedge funds are being rewarded on the breadth of the availability being shown. Changing the supply dynamic to match this demand is crucial,” he concluded.
The participation of retail investors in the financial markets is highly regulated according to Stuart Jarvis, head of strategic partnerships at Sharegain, who explained that extending SBL to retail can prove challenging due to the need to ensure that regulatory compliance is aligned with standard securities lending transaction practices.
“I love the expression of Wall Street to Main Street. That's exactly what it is — we're bringing practices that have been around for a long time and have benefitted institutions, to retail, to Main Street,” Jarvis highlighted.
The ‘Retail and Private Wealth: Unlocking value through Securities Finance’ panel was moderated by Darren Measures, head of securities finance at Maybank Securities. It discussed the retail lending landscape in the US, Europe, and APAC.
In Europe, retail ownership has grown massively as it has globally, according to Jarvis. For example, Germany has seen a 50 per cent growth in the number of retail brokerage accounts over the last three years.
He explored: “If we look at Europe holistically, we’re probably doing it a disservice because the knowledge level, the participation level, is actually very nuanced. If you look to the Nordic markets, Sweden for example, 35 per cent of households are designated retail investors, they have retail investing accounts. Whereas in the UK, for example, that figure is under six per cent.”
Reviewing this, Jarvis suggested that it reflects both the financial literacy and knowledge levels within respective countries and feeds the willingness to adopt new products. He continued: “It's no surprise that the Nordic region was the vanguard of bringing the retail lending product to Europe, but we are starting to see that spread across the 27 markets.”
While the UK has introduced a framework for retail lending, there remain challenges. Jarvis noted that, currently in Europe, retail lending is only active in 12 jurisdictions. Europe has “taken a lot of steps to follow the US”, but there are still significant steps ahead.
Moving forward in the discussion, Measures asked panellists why now was the time for retail and private wealth lending. The most important aspect seemed to be the shift in demographic in retail participation in financial markets.
Gen Z are investing a lot earlier than previous generations and follow different sources for investment advice compared to previous generations, with the use of social media affecting their asset ownership.
“The Gen Z generation is due to inherit US$83 trillion worth of wealth over the next 20 years, with 18 trillion of that coming in the next five years. So the importance of that segment, satisfying it, and bringing product to that segment is massive,” Jarvis confirmed.
The panel also heard that the broadening of asset demand has played a significant role in the growth of retail lending. For instance, Jarvis noted quantitative strategies within the hedge fund world as a key driver on the demand side. He also sees a “massive growth” in the demand for access.
Institutional asset owners and investors are constrained by many aspects that retail is not, such as investment committees, tracking targets, and liquidity constraints. The impact of that, according to Jarvis, is that the breadth of assets owned by these institutional investors is often far narrower than that owned by retail investors.
“Prime brokerage mandates from hedge funds are being rewarded on the breadth of the availability being shown. Changing the supply dynamic to match this demand is crucial,” he concluded.
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