What's behind fintech's rapid rise in Australia?

The fintech industry is thriving in Australia because the country has strong trends that support online SME lending, OnDeck Australia CEO Cameron Poolman told MPA. The trends include early fintech adoption, a favourable macro environment, an encouraging optimism among small businesses, and the industry’s self-regulatory efforts.

According to Poolman, fintech in Australia is transitioning from alternative lending to mainstream lending. Based on the 2nd Asia Pacific Region Alternative Finance Industry Report by the University of Cambridge released in September 2017, Australia now ranks as the second largest alternative finance market in the Asia Pacific region, with a market volume that’s 25 times bigger compared to four years ago.

Meeting unmet demands
“Industry data shows that one in five Australian small businesses were unable to take on new work because of cash flow restrictions, and nine out of ten businesses said better cash flow could have improved revenues by an average of 11.7%,” Poolman said.

“The constant and consistent feedback from small business owners and intermediaries is the inability of traditional lenders to provide timely and appropriate access to capital that will allow them to grow and be agile in their decision making,” Poolman said. “Small businesses need better financing and there is unmet demand and poor product fit from traditional lenders.”

Poolman added that bank credit policy makes borrowing impossible for many small businesses. Banks rely on personal properties, such as housing, to secure small business loans in a country that ranks third in the world for having the most expensive property market.

According to him, fintechs, unlike traditional lenders, “respond quickly to demand with smart, agile, innovative, and relevant products that have been specifically tailored to small businesses”.

“Our focus is the overall financial health of a small business, and not just on the short-term resale value of its assets. We lend against bank statements and based on other metrics that support a longer, more strategic view of a small business’s potential,” Poolman said.

New player in the field
OnDeck marked a historic achievement a few days ago when it became the first online non-bank lender to top $10bn in total loans; but more recently, another fintech has hit Australian shores.

Co-founded by Layton Brooks and Oliver Peckham, Friendly Finance is a financial comparison website that “provides consumers with a trusted point of reference when seeking credit online, focusing on credit cards, loans, and insurance. The fintech offers clients real-time comparisons on the best deals for the credit they’re looking for”.

Brooks and Peckham are UK-born partners who have brought their consumer finance expertise to Australia after engaging in various financial ventures in America and London over the last decade.

“After spending so many years working in financial services, we know how difficult it can be to gain access to the funds you need. We’re all about making things easier for our clients, just like a friend would do for another friend,” Peckham said in a statement.