'More work' needed on regulating alt-fi market: KPMG

A recently released report by KPMG showed Australia’s alt-fi sector is strong, but “more work” needs to be done to enhance policy and regulatory settings if Australia is to retain its position as a leading Asian and global market.

The report, titled Harnessing Potential: Asia-Pacific Alternative Finance Benchmarking Report, found that Australia has the third largest alt-fi market in the Asia Pacific region, reporting over $US348.37 million worth of funding in 2015.

In comparison, China reported a massive $US101.69 billion over the same period, followed by Japan ($US360 million).

The report also found that Australia leads the region for balance sheet (business) lending, with the sector reporting an average growth rate of over 252 per cent between 2013 and 2015. Australia is also leading the way for invoice trading, the total volume of which grew from a negligible amount in 2013 to $US105 million 2015.

Furthermore, Australia’s peer-to-peer lending market grew from $US2 million in 2013 to over $US43 million in 2015.

Meanwhile, only 48 per cent of Australian alt-fi platforms surveyed in the report view existing regulations as adequate and appropriate, with approximately 30 per cent viewing regulation as excessive and too strict.

Ian Pollari, global co-lead for KPMG’s fintech practice, said that while Australia is leading the Asia-Pacific region for business lending and invoice trading, better government intervention would help to boost the sector further.

“While it is very encouraging to see the Australian government and regulators prioritising fintech and alternative finance, it is clear that more work needs to be done to further enhance our policy and regulatory settings if Australia is to retain and enhance its position as a leading Asian and global market,” he said.

Echoing Mr Pollari’s views, InvoiceX founder and director Dermot Crean said the government should be doing more to promote a sector that can address such a pressing need for small business.

“The truth is, unlike consumer lending, a sandbox won’t accelerate the development of innovative new business finance products – but increased involvement from and endorsement by the gamekeeper will accelerate business adoption,” he said.

“The government’s most pressing need now is to accelerate the adoption of alternative finance by SMEs, which would provide a kick start to our economic growth. Introducing disclosure standards as to the cost of finance and terms and conditions of finance – similar to comparison rates for mortgages – is a simple step to take, but would dramatically change the reputation of the sector.

“It’s clear that the regulatory environment needs a 21st Century approach, and the government seems to be aware of this, but we are all waiting to see words turn into action. We’re in a similar position to when the SMSF market first emerged – the regulators had to rapidly come up with a new approach then, and the need is even more pressing now with the increased speed of the development of new business finance products.”

[Related: Regulator warns of P2P lending risks]