Our appetite for alternative finance is on the rise. A KPMG report shows that the Australian alternative finance market grew by 53 per cent to $774 million last year.
Online alternative finance has continued to grow rapidly in Australia. KPMG’s latest work on the area, Cultivating Growth: The 2nd Asia Pacific Alternative Finance Industry Report, shows that Australia is fast becoming a regional leader (behind China).
The alternative finance market has grown from US$27 million ($34 million) in 2013 to US$609 million ($774 million) in 2016.
KMPG found that, in 2016, the largest market volume of alternative lending was through balance sheet business lending, accounting for over US$217 million ($275 million), up from US$120 million ($152 million) in 2015.
The third-largest segment was invoice trading at just under US$130 million ($165 million), up by 16 per cent on the year before. This was followed by peer-to-peer property lending, which reported US$36 million ($45 million), and peer-to-peer business lending with US$6.93 million ($8 million).
However, Australia is a long way behind China, which dominates the alternative finance game. China’s market is worth US$136 billion ($172 billion), equating to 56 per cent of the total market.
“The alternative finance market in Australia has been slower to take off than in some other jurisdictions,” the report noted.
“The general economic resilience of the economy through the global financial crisis, and the strength of the regulatory system, meant relatively little disruption in financial markets and few flow through impacts on the real economy.”
For the business sector, KPMG noted that the withdrawal of international wholesale funding from the banking sector and the retreat of a number of European and US banks meant less access to credit, especially for higher risk SMEs.
However, with a strong retail banking infrastructure and distribution systems, there was little impact on the consumer sector.
“With 99 per cent of Australians having a bank account, there is little concern for issues of financial inclusion,” the report said.
“With the downturn in financial markets, there were some substantial consumer losses, leading to a strengthening in consumer protection around financial services.
"Consequently, the political will to support new digital finance models did not emerge in Australia for some time.”
The research was conducted by a research team from the Cambridge Centre for Alternative Finance, the Australian Centre for Financial Studies at Monash Business School and the Tsinghua University Graduate School at Shenzhen, in collaboration with KPMG and with the support of the CME Group Foundation and HNA Capital.