The Reserve Bank of Australia (RBA) has expressed concern along with regulators that some of the up-and-coming players in the financial market could be a cause for worry over a lack of financial stability. It could threaten the Australian economy as a whole if too much capital stays in the country without a controlled set of regulations for every company to follow.

As more people look for alternative lending options, particularly in the middle of a disposable household income squeeze for many Australians, the newer lenders on the block are seem more attractive.

The Royal Commission inquiry also appears to have tarred many established lenders with a dirty brush, and they have work to do to clean up their image. However, regulators are worried that too many people moving their capital in another direction without control over its flow could have a destabilizing effect on the economy.

One of the highest-risk products on offer is interest-only loans, which banks usually keep on a tighter leash under regulatory demand. A significant number of Australians have been known to overstate their earning capacity to get better loans, especially for mortgages, which gives these customers a higher chance of defaulting. If the lender lacks enough liquidity to withstand a large influx of surprise non-payments at once, then it leaves itself liable to become insolvent.

During a speech in Sydney, RBA Assistant Governor Christopher Kent said that it was clear that ‘non-banks have been lending to some borrowers who may have otherwise obtained credit from banks in the absence of regulatory measures.’

As the Royal Commission criticized major lenders for their initial lack of response to certain issues and regulators for lacking teeth when it came to the effectiveness of their reactions, RBA is concerned that the current situation could be even worse if it is not involved at all.

Most economic crashes tend to occur when many people default on a debt of any kind, and this happened worldwide back in 2008 when banks sold a significant number of mortgages that they should not have. Many economists have been on their toes since as they look to snuff out any chance of the same disaster happening again.

RBA Governor Philip Lowe has been speaking about how bigger players need to start taking outages and delays in credit card payment mechanisms much more seriously amid concerns that Australia is falling behind other countries.

Lowe said that he is running out of patience with these players, adding that if RBA does not step in itself to control the problem, then regulators would have to make enforcements.

New upgrades are necessary to help make the mechanisms more efficient, which would also reduce merchant fees. This move would especially benefit smaller businesses with tighter margins.

Suggesting that all businesses in charge of operating systems have a part to pay, Lowe said: ‘We all need to do better here.’ He noted that the current push toward a more tech-based world will only work if Australia has the payment capacity to facilitate it.

Lowe added that as people are relying less on cash, it is only natural that problems with card payments will become a bigger problem for retailers. He believes that all industry participants need to come together on this issue.