David Ellis, head of investment research and management firm Morningstar, has cast doubt on P2P Marketplace firms’ ability to trouble the traditional banks of Australia.
Recently AltFi talked to Sunil Aranha – CEO of ThinCats Australia, hearing how they were taking business from banks and opening up access to “ a (previously bank dominated) fixed income asset class.” This followed on from research from Morgan Stanley that forecast that the Australian P2P market would reach $22 billion by 2020.
Ellis argues, however, that P2P lenders will not be able to seriously trouble banks, arguing that "there's opportunities for peer-to-peer lending, good opportunities, but that doesn't mean it's going to be a negative for the major banks of Australia,"
He argues that platforms’ reliance on unsecured loans means that they will leave traditional banks’ mortgages and high level business lending model relatively undisturbed:
"I can't really see it really making any inroads into lending that's more complex and where there's a security involved."
Perhaps Ellis should look at what is happening in the UK, where just this week P2P lending platform Landbay announced a deal to fund mortgages, replacing a bank as the source of capital.
Matt Symons, co-founder of Australia’s largest peer-to-peer player SocietyOne, has provided some insight into why alternative finance lenders may make inroads into unsecured loans, but not larger, secured ones:
"Mis-pricing is not necessarily occurring in the big rocks of retail banking, like mortgages, but once you set out into the onion skins...you find there are credit-worthy borrowers who are really not getting funded at the rate that they deserve."
In fact, in our interview with Sunil, he highlighted that P2P platforms may have to be satisfied with this niche when describing the Australian market:
“Australia quite like the UK has a similar situation with a few banks controlling the majority of the market share and a limited risk appetite that does not capture the incremental finance needs of Small Businesses”
The debate as to whether P2P will challenge the traditional banks in Australia rages on. However, with a commercial lending market estimated at $620 billion by the Australian Trade Commission in 2010, even if P2P lenders can take a small slice then the sector could become a large industry on its own. The benefits to borrowers needing for small, unsecured loans can be substantial.
Join AltFi for its third annual Alternative Income Forum, exploring closed-ended funds (investment trusts) specialising in generating an income using alternative assets such as specialist finance, P2P lending, direct lending, asset leasing and more. Hear from the leading investors and fund managers in this rapidly growing market.