Australia has overtaken Japan as the second-largest alternative finance market in the Asia-Pacific region, growing by 53 per cent in one year to US$609 million ($774 million) in 2016.
According to KPMG’s latest work on the area, Cultivating Growth: The 2nd Asia-Pacific Alternative Finance Industry Report, Australia was the second-largest online alternative finance market in the region in 2016, behind China, contributing 30.42 per cent of the total market.
The rise of fintechs, online lenders and peer-to-peer lenders in Australia has led to an increased uptake in small businesses seeking finance from these lenders.
KMPG found that, in 2016, the largest market volume of alternative lending was through balance sheet business lending, accounting for over US$217 million ($275 million), up from US$120 million ($152 million) in 2015.
The third-largest segment was invoice trading at just under US$130 million ($165 million), up by 16 per cent on the year before. This was followed by peer-to-peer property lending, which reported US$36 million ($45 million), and peer-to-peer business lending with US$6.93 million ($8 million).
However, Australia is a long way behind China, which dominates the alternative finance game. China’s market is worth US$136 billion ($172 billion), equating to 56 per cent of the total market.
“The alternative finance market in Australia has been slower to take off than in some other jurisdictions,” the report noted.
“The general economic resilience of the economy through the global financial crisis, and the strength of the regulatory system, meant relatively little disruption in financial markets and few flow through impacts on the real economy.”
For the business sector, KPMG noted that the withdrawal of international wholesale funding from the banking sector and the retreat of a number of European and US banks meant less access to credit, especially for higher-risk SMEs.
Professor Edward Buckingham, executive director of The Australian Centre for Financial Studies at Monash Business School, commented: “The rapid growth of alternative finance in the Asia-Pacific, since this report was first published a year ago, highlights the technological evolution sweeping across the financial sector...
“Unlike previous industrial revolutions, which were geographically localised and sequential, these technological and social developments are taking place in many countries. Fintech-enabled alternative finance has triggered diverse policy and entrepreneurial responses, which are shaping the future of the financial services sector, sometimes in counter-intuitive ways.”
He added: “The many emergent forms of alternative finance will profoundly shape our economies for decades to come. They promise to challenge the regulatory environment, test political will and challenge our ability to embrace change.”
The research was conducted by a team from the Cambridge Centre for Alternative Finance, the Australian Centre for Financial Studies at Monash Business School and the Tsinghua University Graduate School at Shenzhen, in collaboration with KPMG and with the support of the CME Group Foundation and HNA Capital.
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