Australia’s US$1.15 billion alt-fi market including peer-to-peer lending and crowdfunding grew 88 per cent in 2017, surpassing US$1 billion for the first time and consolidating its position to become the second largest market in Asia-Pacific, according to a comprehensive research of the online alternative finance market.
The study, titled “Cultivating Growth: The 3rd Asia Pacific Alternative Finance Industry Report”, surveyed 340 alt-fi companies. It was conducted by The Cambridge Centre for Alternative Finance at University of Cambridge Judge Business School, The Academy of Internet Finance at Zhejiang University, and the Asian Development Bank Institute in collaboration with KPMG, Invesco and CME Group Foundation.
- Australia has remained the second largest alt-fi market in Asia-Pacific, with funding rising from US$609.6 million to US$1.15 billion
- China continued its global domination of the sector with a massive US$358 billion raised in 2017, up from US$243.28 billion in 2016
- Balance Sheet (business) lending in Australia jumped 164 per cent to US$574.01 million in 2017, retaining its position as the leading form of alternative finance by volume
- Peer-to-peer (P2P) and marketplace consumer lending in Australia increased by a factor of 15 times in 2017, up to US$256.67 million
- P2P and marketplace business lending in Australia increased by a factor of 16 times, to US$20.73 million in 2017
- Equity-based crowdfunding fell from US$10.51 million in 2016 to US$2.04 million in 2017
Ian Pollari, National Sector Leader, Banking and Global Co-Leader, KPMG Fintech Practice at KPMG Australia, said, “Whilst China remains well entrenched as the largest online alternative finance market in absolute terms, both globally and regionally, the report also shows the rapid growth in the rest of the Asia Pacific region, with both Australia and South Korea recording market volumes in excess of the US$1 billion for the first time.”
“Whilst the Australian figures point to an encouraging level of adoption, the total size of the alternative finance market is only around 1 per cent of total credit outstanding, so there is substantial upside for the sector. Lack of both consumer and SME awareness remains a major obstacle,” Pollari said
“This third study of the Asia-Pacific online alternative finance market contributes to the growing body of evidence supporting the region’s fast-growing fintech sector. The 2018 report highlights a Chinese industry with a slower pace of growth that is undergoing regulatory changes to enhance the governance practices and the long-term transparency and sustainability of their market.”
In terms of institutional participation rate, Australia was the highest country within the Asia-Pacific region at 65 per cent. Australia was also the country with the least consensus regarding platform perceptions, with 36 per cent of platforms viewing existing regulations as adequate and appropriate, 9 per cent as inadequate and too relaxed, and 27 per cent as excessive and too strict.
When it came to 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.
“The financial services industry is standing at the threshold of unprecedented disruption. The fourth industrial revolution is upon us, and companies are investing record amounts of capital into innovation to ensure their relevance and competitiveness are maintained. As a part of this fourth industrial revolution, a growing alternative finance industry is changing the way individuals and organizations interact with flowing global capital and envision new kinds of products and distribution methods,” said Dave Dowsett, Global Head of Technology Strategy, Innovation, and Planning at Invesco.
“The projection for advancement in alternative finance based on the findings uncovered in this report show that the opportunities remain enticing across the Asia Pacific region. As digital experiences mature, traditional financial models and instruments and the emerging technologies driving alternative finance such as artificial intelligence, process automation, and blockchain collide and intertwine.”