The next few years will see the rapid growth of the alternative finance industry in Australia. This will happen once regulators manage to cope with the increasing consumer demand for alternative finance services. Many of the alternative finance companies have been established in an undefined regulatory environment;, something that has largely hindered their development. Yet the country is ready for innovative and alternative finance methods such as crowdfunding and peer-to-peer (P2P) lending. The change will take place, slowly, but surely, as the regulatory environment becomes clearer, and modifications are made to accommodate the new financing methods.
P2P lending is quickly gaining traction in the land down under. SocietyOne was the first P2P lender to be established in 2012. Several other platforms have since then been creating a strong base for themselves. Most of the P2P lenders are focussing on small and medium enterprise (SME) lending, personal loans and debt consolidation. They have not yet broken into the Australian residential mortgage market. New entrants are definitely expected as regulations are changed to acknowledge the strengthening P2P lending industry. The existing P2P lenders have been operating thus far under the old regulations, which apply to bigger financial institutions.
The increasing demand for alternative financing methods, such as P2P lending, will also be largely driven by the financial consumers of the next generation. Nowadays millennials depend on tech space in every aspect of their lives, and therefore, are likely to seek financial services online. The majority of the financial transactions done by the younger generation is through online systems. They are a major driving force behind the changes needed as legislation recognizes the strength and impact of alternative financing.These factors combined are significant contributors to the booming alternative finance industry in Australia.