Powered by MOMENTUM MEDIA
subscribe to our newsletter

Lender warns of heavy write-offs

The head of one of Australia’s main peer-to-peer lenders has warned that possible asset greed in the alternative lending sector will see it damaged, as overly aggressive growth tactics could be undermining its credit integrity.

‘Market talk’ has it that some Australian P2P lenders are deliberately dropping their lending standards, according to The Invoice Market (tim) managing director Angus Sedgwick, in a crude attempt to accelerate the growth of their asset books.

If correct, this would follow the trend currently being seen in both the UK and US, he said, and could see the sector being hit with unnecessary write-offs in the long run.

“Typically, if funders are experiencing higher than expected loss ratios it may be a reflection of a heavy reliance on algorithmic credit underwriting processes,” he added.

“They may allow for higher volume of transactions but typically are not intuitive or robust enough to accurately assess the quality of transactions in the SME space, particularly where the business is a start-up,” Mr Sedgwick said.

Advertisement
Advertisement

In contrast, he said that by adding an element of human intervention to its own credit assessment process The Invoice Market has kept its loss ratio to below 0.4% of the total book over the past two years.

His comments follow the announcement of a significant milestone being reached by the P2P invoice funder.

One of the early entrants, The Invoice Market is celebrating its second anniversary in the market this week, since it helped its first client cash flow a batch of invoices two years ago to the value of almost a million dollars. 

“From funding our first client tim has built a strong business supporting SMEs where the traditional funders are unwilling, or unable, to do so,” Mr Sedgwick said. 

He also reflected on a number of changes the fledgling industry has already experienced — including the rapid increase in the competitive landscape, funder consolidation, and the development of lead capture portals. 

PROMOTED CONTENT


“Many of these changes have been positive as they are helping to build an awareness of the alternative financing options available for businesses,” he said.

Mr Sedgwick said the main upside of having this extra choice is that SMEs are no longer restricted to on-balance sheet funding only — which many do not want, or are unable to get.

[Related: P2P funder announces rebrand]

Lender warns of heavy write-offs
mortgagebusiness

If you’re feeling overworked and overwhelmed in this fast-paced mortgage market, it’s time to make some changes, and the Business Accelerator Program can help! Tickets are on sale now. Work smarter, not harder, this year.

Latest News

The financial services regulator has released examples of how the incoming rules for add-on insurance will work for CCI, among other credit ...

The major bank has said that it is committed to the sale of its Pacific businesses despite a competition regulator knocking back their propo...

A prime residential lender has announced the pricing of one of its largest prime residential mortgage-backed securities to date. ...

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

How long do you think it should take to discharge a mortgage?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.