Analysis: Westpac’s new online lending investment

Westpac’s venture capital fund, Reinventure, invested in online SME loan broker Valiant last month, around the time its founders were presenting the company to a group of mortgage brokers at Vow Financial’s commercial conference up in the Gold Coast.

Former McKinsey consultant Alexander Molloy and his partner, ex-investment banker Ritchie Cotton, launched the platform last year in an effort to address what Molloy calls “the deluge of online lenders hitting the market”.

“The feeling we got coming out of that was one of confusion,” he told Mortgage Business.

“How are all these offerings different? How are they going to carve out a niche for themselves in the market and how are they going to communicate that difference in their value proposition to their consumers, and the channels that they use to reach those consumers?

“We thought there was space to create a tool to help people on both sides of that conversation understand this explosion in the number of non-bank offerings.”

All brokers can access Valiant, which effectively acts as a comparison engine for Australia’s online SME loan providers. The details of a deal (amount required, available docs etc.) are typed in and generate a shortlist of potential lenders. Rather than submitting an application with multiple lenders to see where the deal might fit, the platform narrows down eligibility in a matter of minutes. The platform hosts a panel of 26 lenders including Prospa, Moula, SpotCap, Kikka Capital, Marketlend, Thin Cats, Timelio, Banjo, InvoiceX, Get Capital, MaxFunding, Crown & Gleeson, Earlypay, Business Fuel and Capital Finance.

Mr Molloy could see that brokers were being “positively shouted at” by a mob of online lenders from small equipment financiers to larger groups providing lines of credit to small businesses. Valiant understood one critical cog that would drive its offering: brokers, financial advisers and accountants are all confused by this swarm of new online players in a game where the major banks still dominate.

The group has partnered exclusively with Yellow Brick Road-owned mortgage aggregator Vow Financial. Vow brokers can now see in minutes whether their clients would be eligible for a wide range of short-term secured and unsecured loans.

Yellow Brick Road Group CEO of lending Tim Brown said the new partnership is validation of the group’s commitment to its broker partners.

“Valiant has an innovative platform that does not exist in the market right now. Everybody wins where there is a strong match between a borrower and lender. The platform will save time for Vow finance brokers and their clients, as well as minimise the risk and anxiety of loan rejection.”

In addition to a welcome cash injection, Westpac’s $50 million VC fund supplied Valiant with some savvy mentors: Reinventure’s co-founders Simon Cant and Danny Gilligan. The fund was an early investor in SocietyOne, Australia’s first P2P lending platform. Not surprisingly the Reinventure team has plenty of experience in the online lending space and with Westpac as the fund’s largest investor, Valiant has been receiving plenty of guidance.

“We tap into them and use them as a sounding board for ideas on how to grow and what are next steps are,” Mr Molloy said.

“It goes beyond funding. It is very much a mentor relationship as well.”

Feedback from brokers and financial advisers has been positive. Neither require too much hard-selling on the value of a free service that can help their clients. The challenge for Valiant, as is the challenge for most new additions to the lending space, is being front of mind when a small business owner visits their local broker.

[Related: Analysis: Is the mortgage industry ready for disruption?]