On Wednesday 20 September 2017, ACFS in conjunction with KPMG launched the 2nd Asia Pacific Region Alternative Finance Industry Report, entitled “Cultivating Growth”, at KPMG’s offices in Sydney. In addition to broad attendance from both banks and members of the alternative finance industry, the event featured a panel of alternative finance provider representatives. Those on the panel were Lachlan Heussler, Managing Director, Spotcap Australia; Anthony Nantes, CEO of DirectMoney and Jonny Wilkinson, Co-founder and Director of Equitise.
The report, produced by Cambridge University’s Centre for Alternative Finance, in collaboration with ACFS and Tsinghua University, highlighted the 53% growth of Australia’s alternative finance market during 2016, with the domestic market leapfrogging Japan’s to emerge as the largest in the Asia-Pacific outside of mainland China. Ian Pollari, Global Co-Leader KPMG Fintech practice, KPMG Australia, credited the study’s “contribution to the [currently nascent alternative finance sector’s] fact-base” and described Australia’s growth as evidence of “the ability of the financial services industry to innovate and embrace” new methods of “doing business”.
Perhaps the only story contained within the report more noticeable than Australia’s was that of China’s. 2016 saw China’s alternative finance market experience monstrous growth, with US$243.38 billion raised last year, accounting for over 99% of the entire Asia-Pacific, and an estimated 85% of the total global market. Whilst Edward Buckingham, ACFS’ Interim Executive Director, commended China on its global leadership in this space, he encouraged those in attendance to “see China for what it really is”. This explosion in China could be largely attributed to a “pent up demand in this area” due to a shortage of “financial inclusion”. Contrastingly, Australia’s strong economic resilience following the Global Financial Crisis has ensured that alternative finance has not been a necessity. Only with a more recent highly concentrated banking sector has more emphasis been placed on the growth of digital financial services.
When questioned about this relatively late adoption of alternative finance in Australia, the panel emphasized the need for a stable supporting regulatory framework. SpotCap’s Lachlan Heussler informed attendees of the “seal of approval” offered by the forthcoming development of a Code of Conduct for the Balance Sheet Business Lending industry. DirectMoney’s Anthony Nantes commended the regulatory environment set for Peer-to-peer lending, confirming that the average consumer was currently in a very stable environment, with more positivity ahead for marketplace lending – increased partnerships between banks and platforms and more IPOs and listings.
The contrastingly uncertain regulatory environment for equity crowdfunding, ahead of legislation taking affect this year, coupled with the notable drop in the activity of Australia’s equity-based models in this year’s report, further demonstrated the importance of appropriate regulation. Despite the relative lateness of legislation around crowdfunding, Equitise’s Jonny Wilkinson focussed on the positives of platforms in this model experiencing difficulty in receiving licensing, including enhanced legitimacy throughout the sector. With eventual economic downturn also inevitable, Jonny emphasized the importance being “open and transparent” with investors, by keeping them informed about failures or exits. “Becoming good at owning failures” and “better communication” with investors was, in his mind, critical to our nation’s alternative finance market continuing to thrive in the future.