At the start of 2015, AltFi scrutinized the status of alternative finance market in Australia. They interviewed local experts and focused on vital data in preparing their report. What they found was a depiction of a market at a very early stage in its journey. That status can easily be compared with where the US and UK businesses were in late 2009 and 2010, respectively. Experts are optimistic that the Australian market is potentially poised to grow, although it will take some time for any significant growth to be realized.
At the close of 2015, Equitise, an Australian crowdfunding platform, released a report on Australian alternative finance market. The report focused on the current status of Australian economy in regard to investments by private companies, and also highlighted some of the prospective disruptors that were already in the financial services industry.
The report highlighted that small and medium-sized enterprises (SMEs) in Australia employ approximately 7 million people (around 70 percent of Australian workforce). They generate an output of over half a trillion dollars, and comprise of about 100 percent innovative businesses with almost $6 billion being spent each year on various research and development projects. Despite all these, SMEs are facing several difficulties in accessing finance for business expansion, or operation development. Approximately 10 percent of Australian SMEs (nearly 200,000 businesses) find it difficult to access capital, while 14.2 percent of SMEs attributed lack of funding as the major obstacle for their business growth and development. Additionally, a NSW Business Chamber report showed that about 37 percent of rejected loan applications were as a result of lack of collateral, and over 40 percent of loan rejections were for amounts below $100,000. It is notably these factors which have demonstrated the difficulty of smaller businesses accessing debt financing.
From this data, it is evident that alternative finance sources, such as crowdfunding, peer-to-peer lenders, and invoice financing firms, have the opportunity to reduce the financing gap in Australian economy.
The report also highlighted that Australia is confident that a fintech revolution can improve the financial situation of small businesses and productivity of the entire nation. Sydney has been particularly identified as Australia’s capital for tech startup business, with about 950 tech startups already up and running. It is also being recognised as a leading fintech hub in Asia Pacific region.
The conclusion of the Equitise report was cautionary. The Australian market is poised for a radical change in the alternative finance sector, and can very well play a key role in facilitating this evolving global phenomenon. Nevertheless, the government should act with promptness so as take advantage of this opportunity, or else they will be left behind.