At the beginning of last year, AltFi investigated the status of the Australian alternative finance market, focusing on some data and interviewing local experts. What emerged was a picture of a market at the very start of its journey, perhaps where the UK and US industries were in late 2010 and 2009 respectively. Insiders have big expectations for Australasia’s growth, but they admitted that significant growth will take time some time to materialise.
At the end of last year, the Australian crowdfunding platform Equitise published a report about the alternative finance market in Australia, focusing on the current state of the Australian economy with regard to private company investment and highlighting some of the future disruptive changes that are currently occurring in the financial services sector down under.
According to this report, SMEs employ around seven million Australians (about 70% of the total employable population), they produce more than half a trillion dollars in output and make up almost 100% of innovative businesses with expenditures of almost $6 billion each year on research and development. Yet, SMEs are experiencing extreme difficulty in accessing new funds to expand their operations. Indeed, 10% of Australian SMEs (approximately 200,000 businesses) have difficulty accessing capital and 14.2% of small businesses identified lack of finance as an obstacle to the growth and development of their businesses. In addition, the NSW Business Chamber reported that 37% of loan rejections occur due to lack of collateral and more than 40% of rejected applications were for amounts less than $100,000 – indicating that particularly smaller businesses struggle to access debt funding.
The scope of this data seems astonishing. These figures would suggest that peer-to-peer small business lenders, crowdfunding and invoice financing platforms have a significant opportunity to make a dent in the market.
The report highlights also that Australia strongly believes in the fintech revolution as a driver to help small businesses to improve their financial situation, and indeed to improve the whole country’s productivity. Sydney has been pointed out not only as the capital of Australia in tech start-up activity, with 950 early stage tech outfits in operation, and as a dominant fintech hub in the Asia Pacific region.
The Equitise report concludes with a cautionary note. The Australian market is seen as at the precipice of radical change and can be part of this growing global phenomenon. However, the government has been warned: it needs to act promptly in order to capitalise on this opportunity before being left behind.