The corporate watchdog has revealed that marketplace lenders operating in the SME space are deriving the bulk of their revenue from origination fees.
The ASIC report, Survey of marketplace lending providers, released this week, is the first of its kind in Australia and aims to provide a ‘snapshot’ of marketplace (or peer-to-peer) lending practices in Australia.
The survey questioned nine lenders representing more than 3,000 investors and 7,000 borrowers in the 2016 financial year. Over the period, $156-million worth of loans were written to consumers and small and medium-sized enterprises (SMEs), according to the regulator.
The report found that 83 per cent of revenue was made up of loan origination fees, but acknowledged that marketplace lending is a relatively new practice in Australia and as such, other forms of revenue such as ongoing and management fees may not have yet been realised.
Commenting on the figure, ASIC said: “If most of the revenue is generated from loan origination, then the provider might have a stronger interest in origination of loans rather than ensuring existing loans are repaid.
“This potential conflict may be amplified by the fact that the provider does not necessarily lend its own funds, but is lending the funds of the investors.”
Noting that providers were aware of potential conflicts, the ASIC report highlighted the “generally low” count of complaints within the sector.
ASIC commissioner John Price said that as a relatively new industry, it is important for the regulator to engage with and better understand the business models of marketplace lending providers.
“The survey responses have provided valuable insights into these businesses. We acknowledge and appreciate the participation of survey respondents,” he said.
The respondents identified a “lack of uniformity and transparency” in the setting of interest rates, leading to compromised comparability and a lack of public awareness and industry understanding as growing trends and issues.
In response to this, ASIC encouraged providers to supply clear information about their business models, aggregated information about interest rates, loan amounts and terms and to give investors optional ‘knowledge tests’ in order to assess their overall understanding.
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