Australia’s burgeoning alternative finance (alt-fi) scene has been making waves in the last couple of years and now has the second-highest level of income in the industry in the Asia-Pacific (APAC) region after China.
With the major banks having been heavily slated for a raft of measures that put sales before customers, many people have been looking elsewhere to secure finance. This has led to an exciting sector that looks to put customers and clients first and maximize its reach using new technologies.
The alt-fi scene in Australia has passed the $1bn mark for the first time, standing at $1.15bn. However, it has some way to go to catch up to China, which has been investing in new ways to deliver financial operations for a while now.
Such is the level of interest in the alt-fi industry that studies have compiled strong research on the subject. One of these, Cultivating Growth: The 3rd Asia Pacific Alternative Finance Industry Report, looks at how the advent of new technology and trust in online mechanisms is leading to a different playing field. The University of Cambridge, Zheijang University, the Asian Development Bank, KPMG, Invesco and CME Group Foundation conducted the report.
Australia’s alt-fi scene primarily involves peer-to-peer (P2P) lending platforms and crowdfunding, and in 2017 alone, it increased by 88%. However, when compared to China, Australia’s numbers pale in significance even if they are impressive. China posted a total of $358bn in 2017, an incredible figure that underlines just how much investment that the country has contributed to the fledgling sector. The figure also increased a great deal from 2016, when it reached $243bn.
Intriguingly, Australia’s P2P and marketplace lending went up 1600% from 2016 to 2017, while equity-based crowdfunding dropped from $10.51m to $2.04m across the same period.
KPMG Australia’s Ian Pollari said that although China is clearly far ahead in alt-fi investment, the report showed that Australia has done much work to kickstart the sector’s development and give backing to the startups in the country that want to make waves. Pollari noted that South Korea has also been progressing well and is not far behind Australia, as it too passed $1bn for the first time.
He said that ‘the Australian figures point to an encouraging level of adoption,’ but he was clear in pointing out that they still represent just a small fraction of the total amount of capital lent to alt-fi. Pollari added: ‘Lack of both consumer and SME awareness remains a major obstacle.’
With increasing clamor to provide solid and reliable evidence that shows where the market is heading, Pollari believes that this report is a key contribution to the development of the sector. The research also indicated that China’s industry now has a ‘slower pace of growth that is undergoing regulatory changes to enhance the governance practices and the long-term transparency and sustainability of their market,’ according to Pollari.
Very few Australian alt-fi platforms have fully adapted their business models yet, with only 8% significantly changing their structure in the last year to take in new technology potential, Overall, 92% have at least changed their operations somewhat to allow new technology in their day-to-day business.