Brokers can “future-proof” their businesses by capitalising on the continued growth of the alternative finance industry, according to the managing director of a business lender.
According to the latest Alternative Finance Industry report from the Cambridge Centre for Alternative Finance, Australia reported the largest funding volume across the Asia Pacific in 2017, with over US$1.14 billion ($1.54 billion) raised and an average growth rate of 88 per cent – up from US$609.5 million ($826.8 million) in 2016.
According to the research, the largest share of market volume came from balance sheet business lending, accounting for over US$574 million ($779 million) in 2017.
P2P/marketplace consumer lending had the second-largest market volume at US$256 million ($347 million), followed by invoice trading (US$142.6 million/$193.5 million), P2P property lending (US$85.0 million /$115 million), reward-based crowdfunding (US$26.6 million/$36.1 million), P2P/marketplace business lending with US$23.1 million ($31.3 million) and real estate crowdfunding US$20.7 million ($28 million).
The report noted that balance sheet consumer lending, equity-based crowdfunding and donation-based crowdfunding all contributed less than US$10 million ($13.5 million) in 2017.
“Australian online alternative finance platforms have been able to adapt operational models and underwriting systems from overseas operators as well as from local banks, and therefore attract much higher levels of institutional participation and funding,” the report stated.
In terms of institutional participation rate, Australia was the highest country within the Asia-Pacific region at 65 per cent. In terms of business model innovation, just 8 per cent of surveyed alternative finance platforms in Australia stated they had significantly altered their business model in the past year, although 92 per cent of platforms reported slightly altering their business models.
Commenting on the report, Lachlan Heussler, managing director of business lender Spotcap, Australia and New Zealand, said that he expects further growth in the alternative finance industry off the back of technological developments.
“This report and its findings are extremely positive news for the future of alternative finance in Australia.
“We predict further rapid growth in the industry as adoption and awareness of fintech lending continues to grow. Soon, online lending will no longer be seen as an ‘alternative’ option among business owners.
“The rocketing demand clearly highlights a real need among Aussie business owners for accessible finance.”
Mr Heussler noted that the rise in demand for alternative finance has presented the broking industry with an opportunity to reap the benefits of the growing market.
“This growth also represents a huge market opportunity for brokers to quickly capitalise on this accelerating industry and future-proof their business by expanding the suite of services they offer their clients,” he added.
The research also found that in terms of product innovation in Australia, half of alternative finance platforms surveyed had “significantly altered their product offering” with the other half “slightly altered their products” in the past year.
The report also stated that the Australian government and regulators have been receptive to fintech development that would further develop the alternative finance industry, pointing to the establishment of the fintech advisory group, the Australian Securities and Investments Commission’s innovation hubs and the work of the Australian Transaction Reports and Analytical Centre.
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