Australia is fast emerging as a new hub of the online alternative lending market. It grew by a staggering 320% in 2015 with the market size at nearly USD $350 million. Now, Australia is the third largest online alternative finance market in the Asia-Pacific region behind China and Japan. Therefore, it comes as no surprise […]
Australia is fast emerging as a new hub of the online alternative lending market. It grew by a staggering 320% in 2015 with the market size at nearly USD $350 million. Now, Australia is the third largest online alternative finance market in the Asia-Pacific region behind China and Japan. Therefore, it comes as no surprise why more and more start-ups are looking to tap the opportunity in this region. A look at the previous year’s growth rates will also highlight the exponential build-up in the sector.
One such start-up making its name in the Australian FinTech industry is Enably, which offers loans in the consumer lending and SMB space. Headquartered in Perth, Enably was founded by David Brennan as Loan Ranger in 2013 and recently rebranded as Enably under the management of the current CEO Andrew Kirkwood.
In its most recent round of funding, the company raised AUS $3.5 million equity and AUS $15 million for a debt facility, which can be further increased to AUS $30 million. The round was led by Corbin Capital, a New York-based investment management firm.
How Enably Enables Loans for Aussies
Brennan came up with the idea for Enably while studying the effects of change in customer demand and regulations in the U.S. and UK FinTech industries. He grasped the power of this disruptive technology and realized the methods used by banks to service customers are obsolete.
The loans Enably provides range from AUS $ 1,000 to AUS $ 10,000 for up to 24 months. Though it might look like an LC or Prosper copy, it is based on a different philosophy. Its product competes on price as well as service, but what sets Enably apart is it’s 100% balance sheet model.
Brennan was not content with consumer lending and looked at other markets to service, so he zeroed in on SMB. Since that was a young market, Enably played it safe by striking a licensing partnership with Kabbage and developing its own CRM in order to customize its credit engine per the needs and demands of the Australian small business market.
In a short span of time, Enably built two successful businesses under one roof. To avoid any confusion, both companies have different staff and target markets.
Since the Australian government promotes research and development and offers tax rebates for companies engaged in R&D, Enably developed a factoring product they plan to launch soon as Radiant Capital. This new arm of the business will provide loans against receivables of the R&D tax rebate. To keep the functioning of all three companies separate, different CEOs have been appointed. Brennan currently serves as CEO of SMB division.
Brennan’s companies are debt funded by American wholesale lenders. Though they have certain financiers from Australia, they are actively diversifying their funding sources and looking to reduce the cost of capital. The consumer lending arm has lent almost AUS $30 million. The SMB arm has done AUS $6 million in last 12 months and plans to expand its credit line to AUS $15 million. The new funding will allow Enably to move beyond payday lending and short-tenure loans to longer tenures and larger loans.
Keeping an Eye on Australian FinTech Opportunities
Australia is a great opportunity for FinTech companies. There are potentially 24 million customers not being served properly by the banks, but the Australian market has its own peculiar characteristics. Though there are over 15 serious players, the industry is still in the market education phase. Another issue is that credit card refinancing is not a big market, so it is standard for Australians to pay down their credit cards at the end of the month. This behavior, though good for the borrowers, keeps lenders from offering debt consolidation products. Instead, Enably focuses on financing holidays and major purchases for consumers.
The Australian regulatory scene has also cleared up. The sector has experienced significant oversight and regulatory changes in the last 3-4 years. Young lenders are held to the same standard as banks, which has led to several compliant operators leaving the market.
Brennan’s companies are in a sweet spot. The current consumer credit market is estimated to be over $170 billion in Australia. Morgan Stanley predicts that online consumer lending will grow to around $10 billion by 2020. The same report estimates that small business online lending should grow to $11 billion by 2020. The market is still developing, and getting in early will allow companies to establish a strong foothold in the market. Since Australians are tech savvy, it’s a matter of time before consumers shift to the hassle-free experience of online lending. With over $33 million of funding, Enably is in a prime position to become the leading player in the market.
News Comments Today’s main news: Nyca Partners raises $125M for second FinTech VC fund Today’s main analysis: P2P lenders lead increase in personal loans. Corporate bond ratings. Today’s thought-provoking articles: Will the UK retain the FinTech crown? United States Nyca Partners raises $125M for second FinTech VC fund. GP:” We are curious to see in which […]
Most consumers open to robo-only retirement advice. AT: “This was a global survey. Be sure to click the link labeled ‘a new survey’ and read a more detailed breakdown of the survey results. As I’d suspect, younger persons are more open to robo-only advice of any kind and older persons are more interested in the best price on services, which often includes robo-advice.”
Morningstar’s corporate credit research highlight. GP: “Most interesting part: The levels in the corporate bond markets are the tightest that credit spreads have registered since the fall of 2014 and are significantly tighter than their long-term averages.”
Will the UK retain the FinTech crown? AT: “This question is asked more and more, since Brexit. But I see no evidence that the UK is losing its ground. However, this interview with Gillian Roche-Saunders is a must-read for its insights in the UK FinTech sector. One interesting comment she made is that the government itself ‘has taken their foot off the Fintech pedal.”
Most people are willing to trust robo-advisors for retirement planning and investment advice, but the majority also want human interaction when it comes to more complex tasks, according to a new survey from consulting firm Accenture.
Sixty-eight percent of people are open to robo-only advice for retirement planning and 78% say they’d welcome it for investing advice, according to a survey of close to 33,000 consumers, of which close to 10,000 were working with a professional wealth or asset manager, in 18 countries and regions conducted in May and June by Accenture.
Nonetheless, Accenture also found that 38% of consumers would switch to Google, Amazon or Facebook for financial advice services, while only 31% would go to one of the tech giants for banking and 29% for insurance.
The levels in the corporate bond markets are the tightest that credit spreads have registered since the fall of 2014 and are significantly tighter than their long-term averages. The average spread of the Morningstar Corporate Bond Index is 42 basis points tighter than its long-term average of +168 since the end of 1998. The average spread of the Bank of America Merrill Lynch High Yield Master Index is currently 187 basis points tighter than its long-term average of +580 basis points since the end of 1996.
Lovell Minnick Partners, a private equity firm specializing in financial and related business services companies, today announced that it has made a growth capital investment in Currency Capital, LLC, an online equipment financing exchange serving owners of small- and medium-sized companies. The investment will support Currency Capital’s growth strategies. Financial terms of the private transaction were not disclosed.
With Currency Capital, borrowers are provided with unparalleled, instant access to financing options from hundreds of lenders with “one click,” making the entire application, selection, approval and funding process simple and transparent.
Currency Capital provided approximately $150 million in loans to customers in 2016. Equipment buyers are also able to purchase equipment for sale by the Company’s industry-leading partners: eBay, Big Tex Trailers, IronPlanet and Proxibid.
Nyca Partners, the venture capital firm focused on the FinTech market, raised $125 million for a second fund. According to a report, Hans Morris, the former Visa president turned venture capitalist, created Nyca Partners in 2014, launching a $30 million fund. The fund invested in a slew of FinTech startups, including Lending Club, SigFig and Orchard. The new fund, which includes 10 institutional investors and 29 limited partner advisors, has made investments in about a dozen startups, including Embroker and Ladder, two insurance FinTechs.
The change in government, and the ramifications of the Brexit decision, has clearly stressed the UK’s prominence in innovative finance. Continental Europe is attempting to take advantage of the decision to depart Europe and Asian business centers, like Singapore and Hong Kong, are seeking to claim the Fintech crown.
Crowdfund Insider: 2016 was a choppy year for some Fintech/Crowdfunding platforms.
Gillian Roche-Saunders: 2016 was a year of highs and lows, and I think it’s fair to say the lows have received more press.
One of my key takeaways from the year is how crowdfunding now feels established as an alternative source of capital.
Crowdfund Insider: What about Peer to Peer lending platforms? You predicted last year there would be more robust rules for online lenders like the handling of client money, vetting, and wind downs. Is that still going to occur?
Gillian Roche-Saunders: What I didn’t predict was that there could be such a disconnect over the definition of peer-to-peer lending activity. The Treasury drafted article 36H specifically to capture the peer-to-peer lending industry’s activities, yet we’ve spent much of the year debating with the FCA whether the industry is actually undertaking that same activity. It could sound like quite a dull and technical debate until you realise that only article 36H loan agreements can go into the Innovative Finance ISA. The knock-on effects of the FCA and Treasury not being joined up on this point are significant for consumers and platforms.
Crowdfund Insider: How is the current political environment for Fintech? Does the government embrace the strategic importance of Fintech for the UK innovation economy?
Gillian Roche-Saunders: If you’d asked me a year ago I would have said that political support was beyond dispute. We had the best ecosystem for Fintech with a regulator and government behind it 100%. I still think we’re heading in the right direction, and let’s not forget it’s been quite a year for the UK, but it does seem as if the government has taken their foot off the Fintech pedal.
Crowdfund Insider: Are you seeing additional Brexit driven concern for Fintech firms? Anyone moving to Paris or Berlin?
Gillian Roche-Saunders: There continues to be a lot of chatter about the Brexit risk, and comments that we will see our talent and companies move abroad. Anecdotally, we have seen the opposite.
As for UK companies, the impact of Brexit will vary depending on the client base. Institutionally focused players, like enterprise tech and Regtech firms, may find their client base moving overseas and need to follow. The challenges in operating in a truly cross-border way have meant that crowdfunding hasn’t been reliant on Europe and that is likely to insulate the industry now.
Crowdfund Insider: What are your predictions for 2017 regarding alternative finance? Another year of growth & innovation or consolidation?
Gillian Roche-Saunders: It’s stating the obvious but 2017 will be the year of the Innovative Finance ISA. Many firms have been laying the groundwork on that for quite some time but we’ve seen a real spike in activity since autumn.
We can certainly expect more innovation generally. As platforms continue to compete for profile and customers, new opportunities to differentiate will be taken up. It will be interesting to see if there is more cross fertilisation between the lending and investment models. We’ve advised clients to focus on one route or another initially – the FCA may treat both sectors under the broad church of crowdfunding but the models are very different – but this year may be the first time when bringing together both under one roof makes sense.
CROWD2FUND is rolling out a white label solution for institutions wishing to expand into peer-to-peer lending.
The platform, which is one of only four P2P lenders to offer the Innovative Finance ISA, is already in talks with potential partners.
Institutions – such as investment firms – will be able to use Crowd2Fund’s “Powered by” feature to operate as a P2P platform under their own brand. Crowd2Fund says it has already seen “significant demand” from institutions looking to leverage their customer base, although it declined to name which ones.
The latest Quarterly Consumer Credit Demand Index from credit agency Veda shows the number of personal loan applications for the December 2016 quarter was 12.4 per cent higher than the December 2015 quarter.
There was a significant pick-up in the growth of personal loan applications in all states and territories, led by NSW and the Northern Territory with an increase of 14.5 per cent, Queensland with 13.1 per cent and Victoria with 12.5 per cent.
Overall consumer credit applications are up 7.7 per cent, with credit card applications rising 3 per cent and mortgage applications up 6.6 per cent.
However, the Veda figures reveal wide geographic variations with mortgage applications.
They were 14.9 per cent higher in the Australian Capital Territory, 11.2 per cent higher in Tasmania, 10.6 per cent higher in Victoria and 9.6 per cent higher in NSW.
However, in Western Australia, applications were 10.6 per cent lower and 10.8 per cent lower in the Northern Territory.
Israel’s Finance Ministry released a draft version of a proposed law Monday that would encourage online peer-to-peer lending by creating a regulatory framework for it. The new law will also create protections for the people lending money through P2P websites, as well as for the borrowers – a move the treasury hopes will give the nascent industry more legitimacy and enable it to become a more serious competitor to the banks and credit card companies.
The Capital Markets Authority will be responsible for enforcing the proposed regulations.
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Ocado running late on overseas deal, revenues up at Britvic, sales slide at Carpetright. FT Opening Quote, with commentary by Matthew Vincent, is your early Square Mile briefing. You can sign up for the full newsletter here.