How ASIC and the Australian government can kindle the fintech boom
Australia is beginning to enjoy the benefits of a fintech boom, but for this emerging industry to grow properly it needs infrastructure support. Without it, we’re at risk of seeing Aussie fintechs left behind as overseas players dominate the Australian and Asian landscape.
There have been some welcome initiatives recently, like ASIC introducing a regulatory sandbox for start-ups to trial new ideas. But compared to other governments around the world, Australia doesn’t have the political support to turn this industry into a powerhouse.
That’s a huge missed opportunity.
Research from Frost & Sullivan predicts the Australian fintech market will add $1 billion in value by 2020. Missing out on this ride could be a massive loss for everyone involved. Morgan Stanley says that marketplace lending to small business (alone) in Australia will have an $11.4 billion market share by 2020 — just over three years away.
There are four main ways we can support Australian fintech now, in the medium term, and into the future:
1. Copy the initiatives that are working overseas
2. Require banks to refer to alternative lenders
3. Encourage fintech investors by enforcing minimum standard on the quality of advice
4. Standardise presentation of interest rates to SME borrowers
Continuing to build on the fintech boom requires a concerted approach by government, regulators, and fintech start-ups.
Learn from other countries
First, regulators and policy makers can look overseas, like ASIC did for the regulatory sandbox, which has also been implemented in the UK, Singapore and Thailand (and last week in Hong Kong). One of the methods by which marketplace lending gained a foothold in the UK was through direct government support.
Back in 2012, the UK Government-backed British Business Bank announced it would allocate £20 million to loans procured through Funding Circle, the predominant SME marketplace lender. The initiative was so successful that it increased that investment to £40 million in 2014.
This year, the European Investment Bank also announced it too would invest £100 million to SMEs through Funding Circle.
Australia’s fintech sector is years behind the UK, and if we are to grow at the same rate, the government should consider directly encouraging marketplace lending as an alternative to traditional business loans.
Make banks refer small businesses to alternative lenders
Another immediate solution would be requiring banks that decline any business loan application to refer that business to an alternative lender, especially a marketplace lender. This would encourage SMEs to find other sources of funds to grow and stay in business.
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Source: How ASIC and the Australian government can kindle the fintech boom – The Australian