PayPal thinks it has the answer for small business lending in Australia

PayPal has provided AU$500 million to 7,000 businesses in Australia since it launched a working capital offering less than five years ago alongside Citi.

“We can see that there is an ongoing demand for alternative finance solutions to support small businesses and help them thrive,” PayPal said in its submission to the Select Committee on Financial Technology and Regulatory Technology.

PayPal considers “information asymmetries” having previously been a “tremendous” challenge in traditional credit scoring.

“Most of the data involved in calculating a traditional credit score came from traditional financial institutions,” it wrote. “Lower income, younger, and minority consumers and small businesses often lacked the prerequisite paper trail to document their historical payments and credit flows, and therefore were considered risky lending propositions.”

It said alternative data elements however, have enabled lenders to say “yes” in cases where previously they would have been unable to do so.

The company also believes the creation of a secure, government-issued digital identity framework linked to an electronic know your customer (KYC) could improve the ecosystem for onboarding, authentication, and verification for electronic payments.

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Source: PayPal thinks it has the answer for small business lending in Australia | ZDNet