P2P Lending
Enterprise

Online Financing Down Under: A Rapidly Evolving Market

Various reports confirm that alternative financing markets are supplanting traditional bank options around the world, notably in Australasia. The Asia-Pacific region, including Australia, New Zealand, China, Hong Kong, Singapore and South Korea, is now home to a thriving range of alternative financing options. In 2015, a report commissioned by ACCA found that alternative financing (non-bank financing) amounted to $102.81 billion, for Y-o-Y growth of 323%.

This startling new trend is part of a much broader global paradigm where individuals and businesses are seeking non-bank financing options. Peer-to-peer lending, marketplace lending, and online loans providers are quickly displacing traditional bank options in the form of bank loans and other conventional forms of credit.

In China for example, peer-to-peer online platforms have resulted in loans worth $129.53 billion over the past 3 years. The research paints a clear picture of trends currently taking place in Australia and New Zealand, where $348.37 million and $267.77 million respectively has been issued through online financing options (through 2015). These statistics are notable since 2012, with a growth rate of 653% between 2013 – 2015.

The report confirmed what many already know in Australia, New Zealand and other countries: alternative financing is now one of the quickest growth sectors in the global financial services industry, particularly as FinTech companies make it easier to apply and be approved for these lines of credit. Several notable trends are driving online lending, including the growth in the number of females using alternative financing. In China for example, 4/10 of peer to peer-based lenders are females, and they also comprise 19% of borrowers.

Huge Rise in Online Lending Facilities

Countries like Australia have seen a dramatic surge in online lending over the years, especially since the 2008/2009 global financial crisis. At that time, regulatory authorities clamped down on banks by requiring capital cushions and stringent checks on who gets approved for loans. As measures tightened, banks approved fewer customers, resulting in a large untapped market of clients. The online financial services industry began to boom.

These alternative financing options require less stringent credit compliance, offer easier approvals, and facilitate easier money transfers to clients. This industry – alternative online finance – is driven by FinTech developments in Australia and the global marketplace. Previously, countries like the United Kingdom and the United States dominated financial services innovation, but now countries across Asia-Pacific such as China and Australia are leading the way.

Australia Leading by Example

According to statistics, peer to peer business lending is one of the most robust markets in the world, followed by peer to peer consumer lending, invoice trading, balance sheet business lending, and balance sheet consumer lending. Multiple resources are available for Australian businesses to tap into this network, including Small Business Loans Australia which provides a comprehensive set of comparisons between different types of lenders.

Various small business loans lenders currently offer funding to Australian clients from $5,000-$400,000 (depending on the industry lender). Australian small business loans lenders such as prospa, Capify, Sail, and Spotcap dominate the market. It’s important to understand how to conduct comparisons of small business loan companies, by evaluating the following factors:

  • What is the quality of the customer service like?
  • How flexible are the repayment terms and conditions?
  • Can the loans be used for any type of business activity?
  • How easy is it to make an online application and be approved?
  • Has the company been approved as a credit provider in Australia?

Clients are advised to conduct their own research into online lenders to verify their authenticity, credibility and user-friendliness. For example, platforms like TrustPilot offer objective assessments of these credit providers. The growth of the FinTech industry, and mobile technology has facilitated a burgeoning new industry to access credit in the global marketplace. Australia is spearheading this initiative with multiple innovative solutions to online financing.